The one-year real interest rate is the effective annual rate. The nominal interest rate, sometimes attribute to the “fixed rate,” is expressed as a percentage. His EAR on this contract is 22.24%.
What is EAR?
- The EAR is an interest rate compounded over a period of time. In other words, The EAR is an interest rate compounded over a period of time.
- In other words, the EAR is the interest rate an investor can earn or pay in his one-year period after investing.
- Comparison of effective annual rates(EAR). For deposits, a higher effective annual interest rate (EAR) means better (higher) returns. For borrowing, a lower EAR means lower borrowing costs (better and cheaper).
- Effective Annual Rate (EAR) is an interest rate that reflects the real rate of return on an investment or savings account and the actual interest rate on a loan or credit card.
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