Interest Rate Converter
Frequently Asked Questions
APR (Annual Percentage Rate) is the simple annual rate. EAR (Effective Annual Rate) accounts for compounding frequency. A 12% APR compounded monthly has an EAR of 12.68% — you actually pay/earn more than the stated rate.
Multiply the monthly rate by 12 for APR. For example, 1% per month = 12% APR. For the effective annual rate (EAR), use: (1 + monthly rate)^12 - 1. So 1% monthly = EAR of 12.68%.
Continuous compounding means interest is added infinitely often. EAR = e^(annual rate) - 1. It's the theoretical maximum return for a given APR. For a 12% APR, continuous compounding gives 12.75% EAR.
More frequent compounding is better for savers and worse for borrowers. Daily compounding earns slightly more than monthly. Look for EAR when comparing savings accounts.