You're here:  Home --> Dictionary --> E --> EAR

A Few Related Terms

APR
Interest Rate
Compounding
Discount Rate

Effective Annual Rate (EAR)
Term category: Finance/Accounting
In 10 words or less:  The interest rate when you account for compounding

Definition: The actual interest rate when accounting for compounding.  It is calculated as follows:

EAR = [1 + (i/n)]^n - 1; where

i = stated annual interest rate
n = number of compounding periods

StockJargon Advice: The concept of EAR is crucial to understand if you carry a credit card balance.  The interest you would have to pay is higher than what the APR indicates.  For example, a 10% APR compounded daily results in an EAR of 10.51%.  A 30% APR compounded daily would result in an EAR of 35%!

Related Articles


Wikipedia: Effective Annual Rate
Wikipedia provides this page with information about EAR's...

EAR Calculator
This calculator allows you to quickly calculate an EAR from a given APR...

An Introduction to Credit
This serves as a brief overview to paying taxes

Related Books

Your Credit Score by Liz Weston
How to Settle Your Debts by Norman Perlmutter
Credit Card Nation by Robert D. Manning
Strategies of Competition in the Bank Card Business by Jarunee Wonglimpiyarat

# -A - B - C - D - E - F - G - H - I - J - K - L - M - N - O - P - Q - R - S - T - U - V - W - X - Y - Z