how do you calculate the effective annual interest rate 
the effective annual interest rate is calculated using the following formula effective annual interest rate 1 in n 1where i nominal interest raten number of periods begin aligned effective annual interest rate left 1 frac i n right n 1 textbf where i text nominal interest rate n text number of periods end aligned effective annual interest rate 1 ni n 1where i nominal interest raten number of periods although it can be done by hand most investors will use a financial calculator spreadsheet or online program moreover investment websites and other financial resources regularly publish the effective annual interest rate of a loan or investment this figure is also often included in the prospectus and marketing documents prepared by the security issuers 