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51
Conversion between APR and EFF
Interest rates can be converted between APR (annual, or nomi-
nal percentage rate) and EFF (effective interest rate).
• The APR is an investment’s annual rate of interest when com-
pounding happens only once a year. The interest rate printed
on a bond is an example of an APR.
• The EFF is an investment’s annual rate of interest when com-
pounding happens more often than once a year. It refl ects the
actual amount of return for a given nominal rate. For example,
if your investment compounds monthly, then the stated nomi-
nal percentage rate becomes a monthly rate, and the EFF
refl ects your actual annual rate of return.
Basic operations
1. Press
s
to clear the display. Make sure the calculator is
in NORMAL mode.
2. Enter the calculation data in the following format:
• To change APR to EFF:
Number of compounding periods per year
>
Nominal
percentage rate
.
P
• To change EFF to APR:
Number of compounding periods per year
>
Effective
interest rate
.
!
Converting between APR and EFF
Procedure Key operation Display
Calculate the
effective interest
rate for twelve
compounding
periods with an
18% APR.
s
12
>
18
.
P
12,18¬EFF
1956
Convert this rate
back to the origi-
nal APR.
12
>
19.56
.
!
12,19.56¬APR
1800
3FinancialFunctionsCurrent.indd513FinancialFunctionsCurrent.indd51 06.7.108:38:49PM06.7.108:38:49PM
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