EFFECT(r,nper)
EFFECT calculates the effective interest rate from a given nominal rate.
Effective interest rate is calculated using this formula:
(1 + r / nper) ^ nper - 1
where:
r = nominal interest rate (stated in yearly terms)
nper = number of periods used for compounding
For example credit cards will list an APR (annual percentage rate) which is a nominal interest rate.
For example if you wanted to find out how much you are actually paying interest on your credit card that states an APR of 19% that is compounded monthly you would type in:
=EFFECT(.19,12) and you would get .2075 or 20.75%. That is the effective percentage you will pay on your loan.