NOMINAL

• How to use NOMINAL formula?
• Examples of using NOMINAL formula
• NOMINAL formula not working?
• Similar formulas to NOMINAL

Usage

Use the NOMINAL formula with the syntax shown below, it has 2 required parameters:

=NOMINAL(effective_rate, periods_per_year)

1. effective_rate (required):
   The effective annual interest rate.
2. periods_per_year (required):
   The number of compounding periods per year. Must be an integer.

Examples

Calculating nominal interest rate

Suppose you have a loan with an effective annual interest rate of 6% and interest is compounded monthly. You can use the NOMINAL function to calculate the nominal annual interest rate as follows: =NOMINAL(6%, 12).

Comparing interest rates

Different loans may have different compounding periods, making it difficult to compare their interest rates. The NOMINAL function can be used to convert effective annual interest rates to nominal annual interest rates with the same compounding frequency so that they can be easily compared.

Investment returns

The NOMINAL function can also be used to calculate the nominal rate of return on an investment given the effective rate and the number of compounding periods per year.

Common Mistakes

Incorrect order of arguments

The effective_rate argument should come before the periods_per_year argument in the NOMINAL formula. Double-check the order of your arguments and switch them if necessary.

Using an annual interest rate instead of an effective interest rate

Make sure that the effective_rate argument in the NOMINAL formula is the effective interest rate per period, not the annual interest rate. If you only have the annual interest rate, you'll need to convert it to an effective interest rate per period before using it in the formula.

Using the wrong number of periods per year

The periods_per_year argument in the NOMINAL formula should be the number of compounding periods per year. Make sure you're using the correct number of periods based on the frequency of compounding (e.g. 12 for monthly, 4 for quarterly, etc.).

Using non-numeric arguments

Both the effective_rate and periods_per_year arguments in the NOMINAL formula should be numeric values. Double-check that you're not using any text or other non-numeric data in these arguments.

Not formatting the result as a percentage

The result of the NOMINAL formula is a decimal value that represents the nominal annual interest rate. Make sure to format the result as a percentage using the % symbol or the 'Percent' number format to make the value easier to read.

Related Formulas

The following functions are similar to NOMINAL or are often used with it in a formula:

• EFFECT

  The EFFECT function calculates the effective annual interest rate based on the nominal annual interest rate and the number of compounding periods per year. It is commonly used in financial calculations to determine the true cost of borrowing or the real rate of return on an investment.

• FV

  The FV function calculates the future value of an investment based on periodic constant payments and a constant interest rate. It takes into account the present value of the investment, the number of periods in which the payments are made, and the compounding frequency. This formula is commonly used in financial planning and investment analysis.

• PV

  The PV function in Google Sheets calculates the present value of a regular payment stream or a lump sum amount, based on a constant interest rate. It is commonly used in financial analysis to determine the value of investments or loans. This function returns a negative value, as it represents money flowing out from the user.

• RATE

  The RATE formula returns the interest rate per period of an annuity. This formula is often used in financial analyses to calculate the rate of return on an investment. It assumes that payments are made at regular intervals and that the interest rate remains constant throughout the duration of the annuity.

• NPER

  The NPER function calculates the total number of payment periods required to pay off an investment based on a constant payment amount, a fixed interest rate, and the present value of the investment. It is commonly used in financial planning and investment analysis.

Learn More

You can learn more about the NOMINAL Google Sheets function on Google Support.