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:
## What is the formula for calculating a mortgage payment?

A: The formula for calculating a monthly mortgage payment on a fixed-rate loan is: P = L[c(1 + c)^n]/[(1 + c)^n - 1]. The formula can be used to help potentia... Full Answer >Filed Under: -
Q:
## How do you calculate the required withdrawal on an IRA?

A: To calculate the required withdrawal from an Individual Retirement Account, use the formula shown on the IRA Required Minimum Distribution Worksheet, accor... Full Answer >Filed Under: -
Q:
## What is the formula for calculating earned value?

A: The formula for earned value is EV = PC x BAC, in which EV stands for the earned value, PC is the percent complete and BAC is the budget at completion. Thi... Full Answer >Filed Under: -
Q:
## What is the formula to calculate return on investment?

A: The formula to calculate return on investment is ROI = (gain from investment - cost of investment) / cost of investment. The subsequent result is expressed... Full Answer >Filed Under: