Find the true effective annual rate for a nominal rate compounded at a given frequency.
The stated rate is divided by how often it compounds, then compounded that many times in a year, to give one true yearly percentage.
EAR: (1 + r/n)ⁿ − 1
Why does the effective rate matter?
It is the only fair way to compare two products that compound at different times. A 12% rate compounded every month is actually worth more than a 12% rate compounded once a year.