Syntax
NOMINAL(effect_rate, npery)
| Parameter | Description |
|---|---|
| effect_rate | Parameter of the NOMINAL function. |
| npery | Parameter of the NOMINAL function. |
Examples
Find nominal rate from APY
Formula
=NOMINAL(0.0617, 12)
6.00%. An effective annual rate of 6.17% with monthly compounding corresponds to a nominal rate of about 6%.
Quarterly compounding
Formula
=NOMINAL(0.0824, 4)
8.00%. An effective rate of 8.24% compounded quarterly gives a nominal rate of 8%.
Daily compounding
Formula
=NOMINAL(0.0513, 365)
5.00%. An effective rate of 5.13% with daily compounding implies a 5% nominal rate.
Common Errors
#NUM!
The effective rate is negative, or npery (compounding periods per year) is less than 1.
#VALUE!
An argument is non-numeric.
Tips
Inverse of EFFECT
NOMINAL and EFFECT are inverse functions. EFFECT(NOMINAL(rate, n), n) returns the original rate, and vice versa.
Setting interest rates on products
If you manage a savings product and want to offer a specific APY, use NOMINAL to figure out what stated rate to advertise.
Always higher compounding frequency = lower nominal
For the same effective rate, more frequent compounding requires a lower nominal rate. This is why daily-compounding accounts can advertise lower APRs while delivering the same APY.
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