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The term annual percentage rate of charge (APR), [1] [2] corresponding sometimes to a nominal APR and sometimes to an effective APR (EAPR), [3] is the interest rate for a whole year (annualized), rather than just a monthly fee/rate, as applied on a loan, mortgage loan, credit card, [4] etc. It is a finance charge expressed as an annual rate.
Since the quoted yearly percentage rate is not a compounded rate, the monthly percentage rate is simply the yearly percentage rate divided by 12. For example, if the yearly percentage rate was 6% (i.e. 0.06), then r would be 0.06 / 12 {\displaystyle 0.06/12} or 0.5% (i.e. 0.005).
This is a reasonable approximation if the compounding is daily. Also, a nominal interest rate and its corresponding APY are very nearly equal when they are small. For example (fixing some large N), a nominal interest rate of 100% would have an APY of approximately 171%, whereas 5% corresponds to 5.12%, and 1% corresponds to 1.005%.
The nominal interest rate, also known as an annual percentage rate or APR, is the periodic interest rate multiplied by the number of periods per year. For example, a nominal annual interest rate of 12% based on monthly compounding means a 1% interest rate per month (compounded). [2]
The interest rate on an annual equivalent basis may be referred to variously in different markets as effective annual percentage rate (EAPR), annual equivalent rate (AER), effective interest rate, effective annual rate, annual percentage yield and other terms. The effective annual rate is the total accumulated interest that would be payable up ...
The effective interest rate is calculated as if compounded annually. The effective rate is calculated in the following way, where r is the effective annual rate, i the nominal rate, and n the number of compounding periods per year (for example, 12 for monthly compounding): [1]
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interest rate (%) Change Effective date of last change Average inflation rate 2017–2021 (%) by WB and IMF [1] [2] as in the List Central bank interest rate minus average inflation rate (2017–2021) Afghanistan: 6.00 3.00: 24 July 2021 [3] 3.38 2.62 Albania: 2.75 0.25: 6 November 2024 [4] 1.78 0.97 Algeria: 3.00 0.25: 29 April 2020 [5] 4.14 ...