EFFECT and NOMINAL: Finding nominal and effective interest rates


show more EFFECT and NOMINAL: Finding nominal and effective interest rates provides you with in-depth training on Business. Taught by Curt Frye as part of the Excel 2010: Financial Functions in Depth show less
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EFFECT and NOMINAL: Finding nominal and effective interest rates

Financial institutions have to advertise the interest rates their products return to investors. Most ads list an annual percentage rate which you can use to calculate the year of the return by using the compound interest formula. Some ads, however, list an annual percentage yield which is the net return and not the actual interest rate applied to the investment. When you compare two or more investment opportunities, you have to make sure that all of your investments terms are expressed using the same type of interest rate. That is, an APR or an APY.

Excel has two functions that let you convert annual percentage rates which are also called nominal rates to annual percentage yields which are called effective rates. So let's say that you want to convert an effective rate or APY to a nominal rate or APR. To do that you need to have two arguments, the first is the effective rate or APY and the number of periods per year. If you look at the numbers on the left- side of my worksheet here, yo...

EFFECT and NOMINAL: Finding nominal and effective interest rates
Video duration: 3m 31s 2h 18m Intermediate

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EFFECT and NOMINAL: Finding nominal and effective interest rates provides you with in-depth training on Business. Taught by Curt Frye as part of the Excel 2010: Financial Functions in Depth

Subjects:
Business IT
Software:
Excel
Author:
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