How to Convert an Effective Rate to a Nominal Rate with NOMINAL in Excel

Turn an advertised annual yield into the monthly rate your savings formulas need, then project a savings plan.

You will learn to

• Convert an effective yield to a nominal rate
• Get the true monthly rate
• Use NOMINAL inside FV

How it works

NOMINAL(effect_rate, npery) is the reverse of EFFECT: it converts an effective annual rate into the nominal rate compounded npery times. =NOMINAL(6.5%,12) returns about 6.314%, and dividing by 12 gives the true monthly rate.

This matters when a platform quotes an annual yield but your model works monthly. Dividing 6.5% by 12 overstates growth; NOMINAL(…)/12 compounds back to exactly 6.5% over a year.

=NOMINAL(B2,B3)/B3