Q:
# How do you calculate the annual equivalent rate?

**The formula for calculating the annual equivalent rate (AER) isAER = (1 + r/n)&supn - 1.** In the formula, "r" is the stated interest, and "n" is the number of times interest is paid. Investors use AER to get a better picture of the interest earned in a year.

AER adjusts for compounding interest. Compound interest is interest added to the principal for a deposit or a loan. As a result, AER is usually higher than an annual percentage rate (APR), and it gives a true picture of interest earnings, according to Investing Answers. This interest on top of interest allows a deposit or loan to grow faster. AER is a good tool for comparing investment products.

Learn more about Financial Calculations-
Q:
## How do you use the cost of sales formula?

A: According to Investopedia, the cost of sales formula is used by adding the amount of purchases to an existing inventory, then subtracting the remaining amo... Full Answer >Filed Under: -
Q:
## What are some examples of ROI calculation?

A: The simplest ROI formula divides the gains earned on an investment by its initial cost, according to Investopedia. Someone who invests $10,000 and earns $1... Full Answer >Filed Under: -
Q:
## What are some tips for calculating your unemployment payments?

A: The criteria for calculating unemployment benefits varies by state, but a common formula is to pay half of the worker's former wage up to a designated limi... Full Answer >Filed Under: -
Q:
## How do you find simple interest?

A: Calculating simple interest requires using the formula I = P*r*t, in which I=interest, P= principal, r=rate and t=time. Knowing the other elements of the f... Full Answer >Filed Under: