EAR
Business & Finance abbreviation · Finance
| Stands for | Effective annual rate |
|---|---|
| Categories | Business & Finance |
EAR stands for Effective annual rate, a finance abbreviation.
Actual annual interest rate earned or paid after accounting for compounding within the year. A nominal 12 percent rate compounded monthly, for example, gives an EAR of about 12.68 percent.
Example: The lender advertises 18 percent, but with daily compounding the EAR is about 19.7 percent.
Usage notes
Calculated as one plus the nominal rate divided by n, raised to the power n, minus one, where n is the number of compounding periods. EAR is the correct way to compare rates with different compounding frequencies. For US consumer savings products, the equivalent disclosed figure is APY (annual percentage yield).
Related abbreviations
More finance abbreviations
- DD – Due diligence
- DIO – Days inventory outstanding
- DPI – Distributions to paid-in capital
- DPO – Days payable outstanding
- DSCR – Debt service coverage ratio
- DSO – Days sales outstanding
- ECM – Equity capital markets
- ERP – Equity risk premium
- ESOP – Employee stock ownership plan
- EV – Enterprise value
- EV/EBITDA – Enterprise value to EBITDA
- EVA – Economic value added