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##### Asked by: Claudinei Kronenberge

business and finance interest rates# How do you calculate ear APR?

**How to Calculate the Effective Interest Rate?**

- Determine the stated interest rate. The stated interest rate(also called annual percentage rate or nominal rate) is usuallyfound in the headlines of the loan or deposit agreement.
- Determine the number of compounding periods.
- Apply the
**EAR**Formula:**EAR**= (1+ i/n)^{n}– 1.

Subsequently, one may also ask, what is the APR equation?

**APR Formula** and Calculation **APR** is the annual rate of interest that is paidon an investment, without taking into account the compounding ofinterest within that year. **APR** is calculated by multiplyingthe periodic interest rate by the number of periods in a year inwhich the periodic rate is applied.

**Effective annual interest ratecalculation**The

**effective annual interest rate**is equal to 1plus the nominal

**interest rate**in percent divided by thenumber of compounding persiods per year n, to the power of n, minus1.

One may also ask, how do you convert APR to monthly interest rate?

To **convert** an annual **interest rate** to**monthly**, use the formula "i" divided by "n," or**interest** divided by payment periods. For example, todetermine the **monthly rate** on a $1,200 loan with one year ofpayments and a 10 percent **APR**, divide by 12, or 10 ÷12, to arrive at 0.0083 percent as the **monthlyrate**.

**APR** stands for **Annual Percentage** Rate. The**annual percentage** rate on a **loan is** the amount thelender **would** charge if you borrowed the money for a year, asa percentage of the original **loan**. For instance at 40%**APR**, to borrow for a year you'd be charged 40% of theoriginal **loan**, on top of paying it back.