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Finance Dictionary and Glossary of Investment Terms
effective annual interest rate
Definition 1.
The actual annual interest rate that accrues, after taking into consideration the effects of compounding (when compounding occurs more than once per year).
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Definition 2.
The annual rate of interest that an investment grows when compounding occurs more often then once a year. Calculated as:
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Definition 3.
An annual measure of the time value of money that fully reflects the effects of compounding.
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