Effective (or equivalent) Annual Rate (EAR or EFF)

The effective annual rate is the rate that, under annual compounding, would have produced the same future value at the end of 1 year as was produced by more frequent compounding, say quarterly.  If the compounding occurs annually, the effective annual rate and the nominal rate are the same.  If compounding occurs more frequently, the effective annual rate is greater than the nominal rate.
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