The effective interest rate does take the compounding period into account and thus is a more accurate measure of interest charges. A statement that the "interest rate is 10%" means that interest is 10% per year, compounded annually. In this case, the nominal annual interest rate is 10%, and the effective annual interest rate is also 10%. Calculation. The effective interest rate is calculated as if compounded annually. The effective rate is calculated in the following way, where r is the effective annual rate, i the nominal rate, and n the number of compounding periods per year (for example, 12 for monthly compounding): = (+) − For example, a nominal interest rate of 6% compounded monthly is equivalent to an effective Find the effective rate of interest corresponding to a nominal rate of 7%/year compounded annually, semiannually, quarterly, and monthly. (Round your answers to two decimal places.)