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EFFECT Google Sheets Formula

Convert your text instructions into Google Sheets formulas - powered by AI.

Syntax
EFFECT(nominal_rate, periods_per_year)
Example Use Case
You have a sales data table with Column A listing product IDs and Column B showing sales figures. Use the EFFECT formula to calculate the effective interest rate on sales over time, helping to analyze profitability and make informed business decisions.
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What is the EFFECT Function in Google Sheets?

The EFFECT function in Google Sheets is a financial function used to calculate the effective annual interest rate based on the nominal interest rate and the number of compounding periods per year. This function is particularly useful for understanding the true cost of borrowing or the actual return on an investment when interest is compounded.

In simpler terms, the EFFECT function helps you determine how much interest you will actually pay or earn over a year, taking into account the frequency of compounding.

A Practical Example

Imagine you are evaluating a loan with a nominal interest rate and want to understand the effective interest rate based on the compounding frequency.

Loan Details:

  • Nominal Interest Rate: 5% (0.05)
  • Compounding Periods per Year: 12 (monthly)

EFFECT Formula

To calculate the effective annual interest rate, you would use the EFFECT function as follows:

EXCEL icon EXCEL 
=EFFECT(0.05, 12)

In this formula:

  • 0.05 is the nominal interest rate (5%).
  • 12 is the number of compounding periods per year (monthly).

Result of the Formula

When you apply the EFFECT formula, the output would be:

UNDEFINED icon UNDEFINED 
0.05116189788

This result indicates that the effective annual interest rate is approximately 5.12%. This means that with monthly compounding, you will effectively pay about 5.12% interest over the course of a year.

Why Use EFFECT?

The EFFECT function is beneficial because it provides a clear understanding of how interest compounding affects the total interest paid or earned. It allows borrowers and investors to make informed decisions by comparing different loan or investment options based on their effective interest rates.

Key Takeaways:

  • EFFECT: A financial function that calculates the effective annual interest rate based on the nominal rate and compounding frequency.
  • Understanding Compounding: Helps to grasp the impact of compounding on interest rates, leading to better financial decisions.
  • Common Use Cases: Ideal for evaluating loans, mortgages, and investment returns where interest is compounded.

The EFFECT function is an essential tool for anyone dealing with finance in Google Sheets, providing valuable insights into the true cost of borrowing and the returns on investments.

Happy calculating!

Check out all of the Google Sheets formulas
ABS(value)
ACCRINT(issue, first_payment, settlement, rate, redemption, frequency, [day_count_convention])
The ACCRINT function calculates the accrued interest for a security that pays periodic interest, based on specified parameters.
ACCRINTM(issue, maturity, rate, [redemption], [day_count_convention])
The ACCRINTM function calculates the accrued interest for a security that pays interest at maturity, based on specified parameters.
ACOSH(value)
The ACOSH function calculates the inverse hyperbolic cosine of a number, returning the angle whose hyperbolic cosine is that number.
ACOS(value)
The ACOS function returns the arccosine (inverse cosine) of a number, providing the angle in radians whose cosine is that number.
ACOTH(value)
The ACOTH function returns the inverse hyperbolic cotangent of a number, useful for mathematical calculations involving hyperbolic functions.
ACOT(value)
The ACOT function returns the arccotangent, or inverse cotangent, of a number, providing the angle whose cotangent is that number.
ADDRESS(row, column, [absolute_relative_mode], [use_a1_notation], [sheet])
The ADDRESS function returns the cell reference as a text string based on specified row and column numbers in Google Sheets.
ADD(value1, value2)
The ADD function in Google Sheets is used to sum a range of numbers, providing the total of those values in a single cell.
AMORLINC(cost, purchase_date, first_period_end, salvage, period, rate, [basis])
The AMORLINC function calculates the linear depreciation of an asset over a specified period, considering the asset's cost and lifespan.
AND(logical_expression1, [logical_expression2, ...])
The AND function checks if all specified conditions are true, returning TRUE if they are, and FALSE if any are not.
ARABIC(roman_numeral)
The ARABIC function converts Roman numerals to their equivalent Arabic numeral values in Google Sheets.
ARRAY_CONSTRAIN(input_range, num_rows, num_cols)
The ARRAY_CONSTRAIN function limits the size of an array by specifying the number of rows and columns to return from the original array.
ARRAYFORMULA(array_formula)
The ARRAYFORMULA function allows you to apply a formula to an entire range of cells, enabling bulk calculations without needing to drag formulas down.
ASC(text)
The ASC function converts full-width characters to half-width characters in Google Sheets, aiding in text normalization.
ASINH(value)
The ASINH function calculates the inverse hyperbolic sine of a number, useful for transforming data in statistical analysis.
ASIN(value)
The ASIN function returns the arcsine, or inverse sine, of a number in radians, useful for calculating angles from sine values.
ATAN2(x, y)
The ATAN2 function calculates the arctangent of the quotient of its arguments, returning the angle in radians between the positive x-axis and the point (x, y).
ATANH(value)
The ATANH function calculates the inverse hyperbolic tangent of a number, returning the angle whose hyperbolic tangent is that number.
ATAN(value)
The ATAN function calculates the arctangent of a number, returning the angle in radians whose tangent is that number.
AVEDEV(value1, [value2, ...])
The AVEDEV function calculates the average of the absolute deviations of a set of values from their mean, providing a measure of variability.
AVERAGEA(value1, [value2, ...])
The AVERAGEA function calculates the average of a range, including text and logical values, treating them as numbers in Google Sheets.
AVERAGEIF(criteria_range, criterion, [average_range])
The AVERAGEIF function calculates the average of a range based on specified criteria, filtering out values that don't meet the condition.
AVERAGEIFS(average_range, criteria_range1, criterion1, [criteria_range2, criterion2, ...])
The AVERAGEIFS function calculates the average of a range based on multiple criteria, allowing for conditional averaging in data analysis.
AVERAGE(value1, [value2, ...])
The AVERAGE function calculates the mean of a set of numbers by summing them and dividing by the count of values.
AVERAGE.WEIGHTED(values, weights, [additional values], [additional weights])
The AVERAGE.WEIGHTED function calculates the average of a set of values, considering their respective weights for accurate representation.
BASE(value, base, [min_length])
The BASE function converts a number into a specified base (2 to 36), returning it as a text string for easier readability in different numeral systems.
BETA.DIST(value, alpha, beta, cumulative, lower_bound, upper_bound)
The BETA.DIST function calculates the probability density or cumulative distribution of a beta distribution for given parameters.
BETADIST(value, alpha, beta, lower_bound, upper_bound)
The BETADIST function calculates the probability density of a beta distribution for given parameters, useful in statistical analysis.
BETA.INV(probability, alpha, beta, lower_bound, upper_bound)
The BETA.INV function returns the inverse of the cumulative distribution function for a beta distribution, given specific parameters.
BETAINV(probability, alpha, beta, lower_bound, upper_bound)
The BETAINV function returns the inverse of the cumulative beta distribution for a specified probability, alpha, and beta parameters.
BIN2DEC(signed_binary_number)
The BIN2DEC function converts a binary number (in text format) to its decimal equivalent, facilitating numerical calculations in spreadsheets.
BIN2HEX(signed_binary_number, [significant_digits])
The BIN2HEX function converts a binary number (in text format) to its hexadecimal representation.
BIN2OCT(signed_binary_number, [significant_digits])
The BIN2OCT function converts a binary number to its octal equivalent, facilitating number base conversions in Google Sheets.
BINOM.DIST(num_successes, num_trials, prob_success, cumulative)
The BINOM.DIST function calculates the probability of a specific number of successes in a given number of trials for a binomial distribution.
BINOMDIST(num_successes, num_trials, prob_success, cumulative)
The BINOMDIST function calculates the probability of a specific number of successes in a fixed number of trials in a binomial distribution.
BINOM.INV(num_trials, prob_success, target_prob)
The BINOM.INV function returns the smallest number of successes for a given probability in a binomial distribution.
BITAND(value1, value2)
The BITAND function computes the bitwise AND of two numbers, returning a number that has bits set to 1 where both inputs have bits set to 1.
BITLSHIFT(value, shift_amount)
The BITLSHIFT function shifts bits of a number to the left or right, effectively multiplying or dividing the number by powers of two.
BITOR(value1, value2)
The BITOR function performs a bitwise OR operation on two numbers, returning a number that represents the combined bits of both inputs.
BITRSHIFT(value, shift_amount)
The BITRSHIFT keyword shifts the bits of a number to the right by a specified number of positions, effectively dividing the number by powers of two.
BITXOR(value1, value2)
The BITXOR function computes the bitwise XOR of two numbers, returning a value where bits are set if they differ between the inputs.
BYCOL(array_or_range, LAMBDA)
The BYCOL function applies a specified operation to each column in a range, returning an array of results based on the applied function.
BYROW(array_or_range, LAMBDA)
The BYROW function applies a specified formula to each row of a given array, returning an array of results based on those calculations.
CEILING.MATH(number, [significance], [mode])
The CEILING.MATH function rounds a number up to the nearest integer or specified multiple, simplifying calculations in spreadsheets.
CEILING.PRECISE(number, [significance])
The CEILING.PRECISE function rounds a number up to the nearest integer or specified multiple, regardless of its decimal value.
CEILING(value, [factor])
The CEILING function rounds a number up to the nearest specified multiple, helping to standardize values in calculations.
CELL(info_type, reference)
The CELL function retrieves information about a specific cell's formatting, location, or contents in a Google Sheets document.
CHAR(table_number)
The CHAR function returns the character specified by a given numeric code, allowing for the insertion of special characters in text.
CHIDIST(x, degrees_freedom)
The CHIDIST function calculates the probability of obtaining a chi-squared statistic less than or equal to a specified value.
CHIINV(probability, degrees_freedom)
The CHIINV function returns the inverse of the chi-squared distribution for a specified probability and degrees of freedom.
CHISQ.DIST.RT(x, degrees_freedom)
The CHISQ.DIST.RT function calculates the right-tailed probability of the chi-squared distribution for a given value and degrees of freedom.
CHISQ.DIST(x, degrees_freedom, cumulative)
The CHISQ.DIST function calculates the chi-squared distribution for a given value, degrees of freedom, and cumulative option.
CHISQ.INV(probability, degrees_freedom)
The CHISQ.INV function returns the inverse of the chi-squared distribution for a specified probability and degrees of freedom.
CHISQ.INV.RT(probability, degrees_freedom)
The CHISQ.INV.RT function returns the inverse of the right-tailed chi-squared distribution for a given probability and degrees of freedom.
CHISQ.TEST(observed_range, expected_range)
The CHISQ.TEST function calculates the probability of observing a chi-squared statistic, comparing observed and expected frequencies in data.
CHITEST(observed_range, expected_range)
The CHITEST function calculates the chi-squared statistic for two sets of data, assessing the independence of categorical variables.
CHOOSECOLS(array, col_num1, [col_num2])
The CHOOSECOLS function selects specific columns from a range, allowing users to extract and display only the desired data.
CHOOSE(index, choice1, [choice2, ...])
The CHOOSE function selects a value from a list based on a given index number, allowing for dynamic data retrieval in a formula.
CHOOSEROWS(array, row_num1, [row_num2])
The CHOOSEROWS function selects specific rows from a range based on given criteria, allowing for dynamic data extraction.
CLEAN(text)
The CLEAN function removes all non-printable characters from a text string in Google Sheets, ensuring the text is clean and readable.
CODE(string)
The CODE function returns the numeric Unicode value of the first character in a text string, useful for character analysis.
COLUMN([cell_reference])
The COLUMN function returns the column number of a specified cell or range, helping identify its position within a spreadsheet.
COLUMNS(range)
The COLUMNS function returns the number of columns in a specified range, helping to analyze data structure in Google Sheets.
COMBINA(n, k)
The COMBINA function calculates the number of combinations of a set, allowing for repetitions, based on the given number of items.
COMBIN(n, k)
The COMBIN function calculates the number of combinations for a given number of items, selecting a specified number without regard to order.
COMPLEX(real_part, imaginary_part, [suffix])
The COMPLEX function creates a complex number from real and imaginary parts, allowing for calculations involving complex numbers in Google Sheets.
CONCATENATE(string1, [string2, ...])
The CONCATENATE function combines multiple text strings into one string, allowing for the creation of longer text entries in a cell.
CONCAT(value1, value2)
The CONCAT function combines multiple text strings into one continuous string in Google Sheets.
CONFIDENCE(alpha, standard_deviation, pop_size)
The CONFIDENCE function calculates the margin of error for a specified confidence level, standard deviation, and sample size in statistics.
CONFIDENCE.NORM(alpha, standard_deviation, pop_size)
The CONFIDENCE.NORM function calculates the margin of error for a population mean based on a specified confidence level and standard deviation.
CONFIDENCE.T(alpha, standard_deviation, size)
The CONFIDENCE.T function calculates the margin of error for a specified confidence level in a dataset with a t-distribution.
CONVERT(value, start_unit, end_unit)
The CONVERT function is used to change a number from one unit of measurement to another, such as converting meters to feet.
CORREL(data_y, data_x)
The CORREL function calculates the correlation coefficient between two data sets, indicating the strength and direction of their linear relationship.
COS(angle)
The COS function returns the cosine of an angle given in radians, useful for trigonometric calculations in spreadsheets.
COSH(value)
The COSH function calculates the hyperbolic cosine of a given angle in radians, useful for mathematical and engineering applications.
COT(angle)
The COT function calculates the cotangent of an angle in radians, useful for trigonometric calculations in spreadsheets.
COTH(value)
The COTH function calculates the hyperbolic cotangent of a given angle in radians, returning a numerical value.
COUNTA(value1, [value2, ...])
The COUNTA function counts the number of non-empty cells in a range, helping to determine how many entries exist in that range.
COUNTBLANK(range)
The COUNTBLANK function counts the number of empty cells in a specified range, helping to identify missing data in a dataset.
COUNTIF(range, criterion)
The COUNTIF function counts the number of cells that meet a specified condition within a given range.
COUNTIFS(criteria_range1, criterion1, [criteria_range2, criterion2, ...])
The COUNTIFS function counts the number of cells that meet multiple criteria across different ranges in a Google Sheets spreadsheet.
COUNTUNIQUE(value1, [value2, ...])
The COUNTUNIQUE function counts the number of distinct values in a specified range, ignoring duplicates.
COUNT(value1, [value2, ...])
The COUNT function counts the number of cells in a range that contain numeric values, helping to quantify data effectively.
COUPDAYBS(settlement, maturity, frequency, [day_count_convention])
The COUPDAYBS function calculates the number of days from the beginning of a coupon period to the settlement date for a bond.
COUPDAYSNC(settlement, maturity, frequency, [day_count_convention])
The COUPDAYSNC function calculates the number of days from the settlement date to the next coupon payment date for a bond.
COUPDAYS(settlement, maturity, frequency, [day_count_convention])
The COUPDAYS function calculates the number of days from the settlement date to the next coupon payment date for a bond.
COUPNCD(settlement, maturity, frequency, [day_count_convention])
The COUPNCD function returns the next coupon date for a security based on its settlement date and coupon frequency.
COUPNUM(settlement, maturity, frequency, [day_count_convention])
The COUPNUM function calculates the number of coupon payments remaining for a bond based on its settlement date and maturity date.
COUPPCD(settlement, maturity, frequency, [day_count_convention])
The COUPPCD function calculates the next coupon payment date for a security based on its settlement date and coupon frequency.
COVAR(data_y, data_x)
The COVAR function calculates the covariance between two data sets, indicating how much they change together.
COVARIANCE.P(data_y, data_x)
The COVARIANCE.P function calculates the covariance between two sets of data, indicating how they change together in a population.
COVARIANCE.S(data_y, data_x)
The COVARIANCE.S function calculates the sample covariance between two data sets, indicating how they vary together.
CRITBINOM(num_trials, prob_success, target_prob)
The CRITBINOM function calculates the smallest number of successes in a binomial distribution for a given probability and number of trials.
CSC(angle)
The CSC function calculates the cosecant of an angle in radians, returning the reciprocal of the sine of that angle.
CSCH(value)
The CSCH function calculates the hyperbolic cosecant of a given angle in radians, returning the reciprocal of the hyperbolic sine.
CUMIPMT(rate, number_of_periods, present_value, first_period, last_period, end_or_beginning)
The CUMIPMT function calculates the cumulative interest paid on a loan over a specified period, based on constant payments and interest rates.
CUMPRINC(rate, number_of_periods, present_value, first_period, last_period, end_or_beginning)
The CUMPRINC function calculates the cumulative principal paid on a loan between specified periods, helping track repayment progress.
DATEDIF(start_date, end_date, unit)
The DATEDIF function calculates the difference between two dates in specified units (days, months, or years).
DATEVALUE(date_string)
The DATEVALUE function converts a date in text format into a serial number that Google Sheets recognizes as a date.
DATE(year, month, day)
The DATE function creates a date value from year, month, and day inputs, allowing for date calculations and formatting in Google Sheets.
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