Applying nominal versus effective interest rates (APR versus APY)


show more Applying nominal versus effective interest rates (APR versus APY) provides you with in-depth training on Business. Taught by Curt Frye as part of the Excel 2007: Financial Analysis show less
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Applying nominal versus effective interest rates (APR versus APY)

Financial institutions like to advertise the interest rates their products return to investors. Most ads list an annual percentage rate, which you can use to calculate the yearly return using the compound interest formula you learned earlier. Some ads, however, list an annual percentage yield, which is the net return and not the actual interest rate applied to the investment. When comparing two or more investment opportunities, you must make sure that all of the investments' terms are expressed using the same type of interest rate. Annual percentage rate versus annual percentage yield.

There are two built-in Excel functions you can use to convert annual percentage yields to annual percentage rates and vice versa. The first is the Effect or Effective function, which you can use to determine the annual interest earned in a year expressed as a percentage of the principal. You can use the Nominal function to determine an annual percentage rate when presented with an annual percentage yi...

Applying nominal versus effective interest rates (APR versus APY)
Video duration: 3m 21s 2h 18m Intermediate

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Applying nominal versus effective interest rates (APR versus APY) provides you with in-depth training on Business. Taught by Curt Frye as part of the Excel 2007: Financial Analysis

Subject:
Business
Software:
Excel
Author:
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