what is the effective rate formula?
There are numerous effective rate formulas in math. You will need to be more specific.
The term "effective rate" can refer to different formulas depending on the context. In finance, the effective interest rate formula is commonly used. The formula for the effective interest rate (EIR) can vary based on different compounding periods, but the general formula is:
EIR = (1 + r/n)^(n*t) - 1
Where:
- EIR is the effective interest rate
- r is the nominal interest rate (annual interest rate)
- n is the number of compounding periods per year
- t is the number of years
To calculate the effective interest rate, you need to know the nominal interest rate and the compounding frequency. For example, if the nominal interest rate is 6% compounded quarterly for 3 years, you would substitute the values into the formula:
EIR = (1 + 0.06/4)^(4*3) - 1
EIR = (1.015)^(12) - 1
EIR ≈ 0.0617 or 6.17%
Please note that this formula is specifically for calculating effective interest rates. If you were referring to a different type of effective rate formula, please provide more details so I can assist you further.