Definitions for

**"Effective annual interest rate"**The yield on a debt instrument calculated from the purchase price. The effective rate on a bond is determined by the price, coupon rate, time until maturity and time between interest payments.

the interest rate as if it were compounded once per time period rather than several times per period.

The actual annual interest rate that accrues after taking into consideration the effects of compounding (when compounding occurs more than once per year).