Calculate Annual Effective Rate
An investment's annual rate of interest when compounding occurs more often than once a year.
Please fix these errors:
Interpretation:
If you were to receive $#TerminalValue# in #TimeInYear# years from now, that $#TerminalValue# would be worth only $#InitialAmountInvested# today. So, if today you were to invest the $#InitialAmountInvested# at a rate of #AnnualEffectiveRate#, you would have $#TerminalValue# at the end of #TimeInYear# years.What does this mean to you? Well, if you had the opportunity to take an amount
higher than the $#InitialAmountInvested# today instead of taking the
$#TerminalValue# at the end of #TimeInYear# years, you should take the money
today. By doing so, you would be able to invest the higher amount at
#AnnualEffectiveRate# for #TimeInYear# years, which would end up being more
than the $#TerminalValue#.
OOPS!!!
The annual effective rate is too small. This means that you either need to increase your terminal value, decrease the initial amount invested, or shorten your time frame.
Try again.
OOPS!!!
The annual effective rate is too large. This means that you either need to decrease your terminal value, increase the initial amount invested, or increase your time frame.
Try again.
Related Links:
- Understanding the Time Value of Money - Find out how time really is money by learning to calculate present and future value.