Nominal Interest Rate Formula


i = m x ((1 + r)1/m - 1)
r = Effective annual rate of interest
i = Annual nominal rate of interest
m = Number of compounding periods in a year


The nominal interest rate formula calculates the annual nominal rate of interest (i), based on an effective annual rate (r). and a number of compounding periods in a year (m).

Excel Function

The Excel NOMINAL function can be used instead of the nominal interest rate formula, and has the syntax shown below.

i = NOMINAL(r,m)

Nominal Interest Rate Formula Example

If the effective rate is given as 5.116%, what is the annual nominal interest rate if compounding takes place monthly?

The nominal interest rate for the year is calculated using the nominal interest rate formula as follows:

Nominal interest rate = i = m x ((1 + r)1/m - 1)
r = effective annual rate = 5.116%
m = compounding periods in a year = 12
Nominal interest rate = 12 x ((1 + 5.116%)1/12 - 1)
Nominal interest rate = 5.000%

The same answer can be obtained using the Excel NOMINAL function as follows:

Effective annual rate = NOMINAL(r,m)
r = 5.116%
m = 12
Nominal interest rate = NOMINAL(5.116%, 12)
Nominal interest rate = 5.000%

The nominal interest rate formula is one of many annuity formulas used in time value of money calculations, discover another at the links below.

Nominal Interest Rate Formula November 6th, 2016Team

You May Also Like

Related pages

horizontal analysis examplecash in transit accounting definitionprice and quantity varianceexample of journalizing in accountingreturn on capital employed ratio interpretationdeferred revenue entrysundry payments definitionstatement of comprehensive income formataccounting for unearned revenuereduced balance depreciationperiodic and perpetualannuity discount factor formulaamortization schedule creatorhow to rectify errors in accountingoperating expenses to sales ratio formulareceivables turnover days formulabank reconciliation statement excel formatstraight-line method of depreciation calculatorequivalent units for conversion costsaccounting for sales discountsannuity function in excela post closing trial balance should only containcontribution margin in dollarsformula for profitability indexbook keeping journalcalculating a mortgage payment formulais prepaid rent an assetretained earningdebt equity ratio formula with exampledistinguish between trial balance and balance sheetannuity table calculatorgeneral ledger entry examplesretained earning meaningdebtor day calculationeconomic entity assumption definitionusefulness of variance analysisexcel templates for bookkeepingjournal entries for depreciation of fixed assetdifference between account payable and notes payablepayroll tax accounting entriesperpetuity calculation formulaledger sheet examplehow to calculate discount on excelaccounting journalizing examplesretained earnings journal entrywhat is sunk cost in accountingdebit credit journalexcel input form templateexcel formula for annuitypresent value of a lump sum calculatorgraduated annuitycurrent portion of long term debt journal entryjournal entry for depreciation expenseaccounts receivables turnover ratioconsigned goodspercentage markup calculatorpaid in capital in excess of par balance sheetwhat are sundries in accountingjournal entry for bad debtcalculating receivables turnoverunpaid salaries adjusting entrysample statement of stockholders equityfederal income tax expense adjusting entryvertical analysis income statement calculatordepreciation equation accountinganuity formulaear financial calculatorbank reconciliation statement preparationaccounting spreadsheet templates for small businesshow to calculate total variable cost per unithow do you calculate variable cost per unitfully depreciatedhow to calculate number of days sales in receivablesbond amortization schedule straight line methodcash receipts and cash disbursementsinvestment turnover ratio interpretationactivity based depreciation formula