### What Is Effective-Interest-Rate?

Effective Interest Rate is used to compare the interest rates between loans with different periods , such as per period , for t Period , for Compounding Period . Using following formula -:

**Effective Interest Rate per Period:**
i = (1 + r / m)^{m} - 1

Where

i = Effective Interest Rate in decimal form

I = Effective Interest Rate in percent

m = Compounding Periods

R = Rate of interest per period in percent

r = Interest Rate in decimal form

**Effective Interest Rate for t Periods:**
i_{t} = (1 + i)^{t} - 1

Where

i = Effective Interest Rate in decimal form

t = Time Periods

**Effective Interest Rate per Compounding Period:**
P = R / m

Where

m = Compounding Periods

R = Rate of Interest per Period in Percent