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Effective Annual Rate(EAR)
The EAR is the rate of interest actually earned on an investment or paid on a loans as a result of compounding the interest over a given period of time.It is actually higher than the nominal rate and is used to compare different financial products that calculate annual interest with different compounding periods-Weekly,monthly,yearly,etc.
EAR=[1+(Nominal Interest Rate/no. of compounding period)]^no. of compounding period-1
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