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##### Asked by: Ilonka Broder

business and finance interest rates# What is EIR method?

Last Updated: 19th February, 2020

**method**is a technique for calculating the actual interest rate in a period based on the amount of a financial instrument's book value at the beginning of the accounting period.

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People also ask, how is EIR calculated?

The effective interest rate is **calculated** through a simple formula: r = (1 + i/n)^n - 1. In this formula, r represents the effective interest rate, i represents the stated interest rate, and n represents the number of compounding periods per year.

Also Know, why is the effective interest method preferred? The **preferred method** for amortizing the bond premium is the **effective interest** rate **method** or the **effective interest method**. This means that when a bond's book value decreases, the amount of **interest** expense will decrease.

Consequently, what is EIR?

Traditionally, an **EIR** is a position at a venture capital firm. Usually the **EIR** is an accomplished executive whom the firm is willing to back financially. Often, an **EIR** is between stints running a company or is someone who just exited from one of the portfolio companies of the firm.

What are the different methods of amortization?

**Methods of amortization**

- Straight line (linear)
- Declining balance.
- Annuity.
- Bullet (all at once)
- Balloon (amortization payments and large end payment)
- Increasing balance (negative amortization)