Join Curt Frye for an in-depth discussion in this video EFFECT and NOMINAL: Finding nominal and effective interest rates, part of Excel 2010: Financial Functions.
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, you'll see…
- Analyzing loans, payments, and interest
- Discovering the interest rate of an annuity
- Determining depreciation using the straight line, declining balance, double-declining balance, and other methods
- Calculating the future value of an investment with variable returns
- Finding the discount rate of a security
- Converting between fractional prices and decimal prices
- Determining the yield of securities that pay interest periodically
Skill Level Intermediate
Q: Where can I learn more about Excel formulas?
A: Discover more on this topic by visiting Excel formulas on lynda.com.
Managing and Analyzing Data in Excel 2010with Dennis Taylor1h 32m Appropriate for all
1. Analyzing Loans, Payments, and Interest
2. Calculating Depreciation
3. Determining Values and Rates of Return
4. Calculating Bond Coupon Dates and Security Durations
5. Calculating Security Prices and Yields
6. Calculating Prices and Yields of Securities with Odd Periods
Additional resources1m 5s
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