The Effective Annual Return 6.27%
Effective Annual Return = (1+APR/m)^m-1
APR = Annual Percentage Rate
m = No.of Compoundings Per Year
Monthly Effective Annual Return = (1+0.061/12)^12-1
= 0.06273469
= 6.27%
An effective annual interest rate is the real return on a savings account or any interest-paying investment when the effects of compounding over time are taken into account. It also reflects the real percentage rate owed in interest on a loan, a credit card, or any other debt.
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