EFFRATE Function

Returns the effective annual interest rate.

Category:

Financial

Syntax

EFFRATE(compounding-interval, rate)

Required Arguments

compounding-interval

is a SAS interval. This value represents how often rate compounds.

rate

is numeric. rate is a nominal annual interest rate (expressed as a percentage) that is compounded at each compounding interval.

Details

The EFFRATE function returns the effective annual interest rate. The function computes the effective annual interest rate that corresponds to a nominal annual interest rate.

The following details apply to the EFFRATE function:

The values for rates must be at least –99.
In considering a nominal interest rate and a compounding interval, if compounding-interval is 'CONTINUOUS', then the value that is returned by EFFRATE equals e^rate/100–1.

If compounding-interval is not 'CONTINUOUS', and m compounding intervals occur in a year, the value that is returned by EFFRATE equals (1+[rate/100 m])^m–1.
The following values are valid for compounding-interval:
- 'CONTINUOUS'
- 'DAY'
- 'SEMIMONTH'
- 'MONTH'
- 'QUARTER'
- 'SEMIYEAR'
- 'YEAR'
If the interval is 'DAY', then m=365.

Example

If a nominal rate is 10%, then the corresponding effective rate when interest is compounded monthly can be expressed as
```
effective_rate1 = EFFRATE('MONTH', 10);
```
If a nominal rate is 10%, then the corresponding effective rate when interest is compounded quarterly can be expressed as
```
effective-rate2 = EFFRATE('QUARTER', 10); 
```