The Excel NOMINAL function returns the nominal interest rate, given an effective annual interest rate and the number of compounding periods per year. The effective rate is the actual rate due to compounding. The nominal rate is typically the stated rate.
Syntax:= NOMINAL (effect_rate, npery)
The NOMINAL function syntax has the following arguments:
- Effect_rate Required. The effective interest rate.
Npery Required. The number of compounding periods per year.
Example: Let’s look at some Excel NOMINAL function examples and explore how to use the NOMINAL function as a worksheet function in Microsoft Excel:
Based on the Excel spreadsheet above, the following NOMINAL examples would return:
- Remember that npery gets truncated to an integer.
- #NUM! error – Occurs when:
- The given effect_rate is less than or equal to zero.
- The given npery is less than 1.
- The NOMINAL function will return a VALUE! error if any of the given arguments is non-numeric.
- The NOMINAL rate is related to the EFFECTIVE rate. The relationship between the NOMINAL and EFFECT functions can be understood by the following formula: