Excel 2000 in a Nutshell

Name

NOMINAL

Synopsis

You can use NOMINAL (an Analysis Toolpak function) to determine the nominal annual interest rate for an investment. To use this function you need to know the effective annual interest rate and the number of times the interest is compounded per year.

To Calculate

=NOMINAL(Effect_Rate, Npery)

Both arguments are required for this function.

Effect_Rate

A numeric value that indicates the effective interest rate for the investment. For example, if the interest rate is 10.5% the value of this argument would be 0.105.

Npery

A numeric value that indicates the number of times per year that the interest is compounded.

Example

The EFFECT function covered in this chapter has an example illustrating the results of converting a 12% effective interest rate with interest paid monthly to the equivalent nominal rate. Notice that because the interest is not compounded, it is actually a 11.38% nominal rate.