NOMINAL function

Returns the nominal annual interest rate given an effective rate and the number of compounding periods per year.

=NOMINAL(effect_rate, npery)

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Arguments

How NOMINAL reads its arguments
effect_raterequirednperyrequiredNOMINAL →
ArgumentRequiredDescription
effect_rateRequiredThe effective annual interest rate expressed as a decimal (e.g., 0.05 for 5%). Must be greater than −1.
nperyRequiredThe number of compounding periods per year as a positive integer (12 for monthly, 4 for quarterly, 365 for daily). Must be at least 1.

Returns

Returns a decimal number representing the nominal annual interest rate (e.g., 0.06 for 6%).

Availability

Excel: All · Google Sheets: Supported

Worked examples

1. Calculate the nominal rate from a loan's effective rate

CategoryBudgetedActualVariance
Loan Interest$50$51.72-$1.72
Credit Card$30$31.47-$1.47
Groceries$400$425-$25
Utilities$120$128-$8
=NOMINAL(0.0617, 12)

Result: 0.06 (or 6%)

Your household loan has an effective annual rate of 6.17% after monthly compounding. NOMINAL reveals that the nominal annual rate quoted in your loan agreement is 6%. This demonstrates why lenders advertise lower nominal rates—once compounding is factored in, you pay the higher effective rate. Comparing both helps you evaluate loan offers fairly.

2. Find the nominal APR from a credit card's effective rate

CategoryBudgetedActualVariance
Loan Interest$50$51.72-$1.72
Credit Card$30$31.47-$1.47
Groceries$400$425-$25
Utilities$120$128-$8
=NOMINAL(0.1956, 12)

Result: 0.1775 (or 17.75%)

Your credit card statement shows an effective annual rate of 19.56% due to daily compounding. NOMINAL converts this back to the nominal annual percentage rate of 17.75%, closer to the 18% APR your card issuer advertises. This shows the gap between advertised and actual rates—compounding throughout the year adds real cost that nominal rates hide.

3. Determine the nominal rate from a savings account's effective yield

CategoryBudgetedActualVariance
Loan Interest$50$51.72-$1.72
Credit Card$30$31.47-$1.47
Groceries$400$425-$25
Savings Interest$1$1.02-$0.02
=NOMINAL(0.0202, 12)

Result: 0.0201 (or 2.01%)

Your household savings account earns an effective annual rate of 2.02% with monthly compounding. NOMINAL shows the equivalent nominal annual rate is 2.01%, which is what your bank displays. At low rates, the difference between nominal and effective is small, but compounding still adds real value to savings over years.

Common errors

Which NOMINAL error are you seeing?
NOMINAL returned an error#VALUE!
Convert npery to a number representing compounding periods per year: 12 for monthly, 4 for quarterly, 2 for semi-annual, 365 for daily.
#NUM!
Ensure effect_rate is greater than −1. Negative rates (like −0.01 for a −1% rate) are valid, but −1 and lower are not.
#NUM!
Provide npery as a positive integer matching your compounding frequency: at minimum 1, and typically 1, 2, 4, 12, or 365.
ErrorWhy it happensHow to fix it
#VALUE!The npery argument is text, a date, or other non-numeric data (e.g., npery is supplied as 'monthly' instead of 12).Convert npery to a number representing compounding periods per year: 12 for monthly, 4 for quarterly, 2 for semi-annual, 365 for daily.
#NUM!The effect_rate argument is less than or equal to −1 (e.g., −0.5 or −1.0), which produces an undefined mathematical result.Ensure effect_rate is greater than −1. Negative rates (like −0.01 for a −1% rate) are valid, but −1 and lower are not.
#NUM!The npery argument is zero, negative, or a fractional value (e.g., 0 or −4), since you cannot have zero or negative compounding periods.Provide npery as a positive integer matching your compounding frequency: at minimum 1, and typically 1, 2, 4, 12, or 365.

Tips and when to use something else

  • Use EFFECT to convert the opposite direction—from nominal to effective rate. These two functions are mathematical inverses of each other.
  • Always express npery as compounding periods per year, not per month or decade. Monthly = 12, quarterly = 4, semi-annual = 2.
  • When comparing loan or credit card offers, calculate both nominal and effective rates to see the true cost. A 6% nominal rate feels low until you see the effective rate is 6.17%.
  • For daily compounding, use npery = 365 (or 360 in some banking conventions). Ask your lender which they use, as it affects the result.

Related functions

EFFECTEFFECT returns the effective annual interest rate given a nominal annual rate and number of compounding periods per year.RATERATE calculates the interest rate per period for an investment or loan given regular periodic payments and present/future values.PMTPMT calculates the constant periodic payment needed to repay a loan or investment over a fixed number of periods at a fixed interest rate.IPMTIPMT returns the interest portion of a loan or investment payment for a specific period with constant payments and interest rate.NPERNPER returns the number of payment periods needed to pay off a loan or reach an investment goal at a fixed interest rate.

Frequently asked questions

What's the difference between NOMINAL and EFFECT?
NOMINAL converts from effective rate to nominal rate; EFFECT does the reverse. If you know the effective annual rate your lender charges, NOMINAL tells you the nominal (advertised) rate. If you know the nominal rate, EFFECT calculates the actual effective rate you'll pay after compounding.
Why is the nominal rate always lower than the effective rate?
Nominal rates are what lenders advertise because they look better. The effective rate accounts for compounding throughout the year, which means you pay interest on interest. The more frequent the compounding, the larger the gap between nominal and effective.
Should I use npery = 365 or 360 for daily compounding?
Check your bank's convention. Some banks use 365-day years, others use 360-day banker's years. Ask your lender explicitly or review your loan/account agreement. Using the wrong value produces slightly different results.
Can I use NOMINAL for investments like stocks or mutual funds?
NOMINAL applies only to fixed-rate interest-bearing products: loans, bonds, savings accounts, and certificates of deposit. For stocks or funds, use tools that calculate total return and compare yield-to-expenses.

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Reviewed 2026-09-17