EFFECT Excel Formula

Author Zaheer    Category Formulas     Tags ,

Excel offers a lot of Functions that ranges from Engineering Functions, Database Functions, and even Financial Functions. But before you are able to use these functions you must first enable the add-ins in the Analysis ToolPak of Excel to avoid the error #NAME?  to occur while or in using the functions.

To do this, enable the Analysis ToolPak Add-Ins in Excel 2003 by selecting first Tools and on the drop-down list hit the Add-Ins. The Add-Ins window will appear and on it select the Analysis ToolPak and hit OK.

Moreover, for the Excel 2007 and 2010 click the Excel Options on the upper left side of the spreadsheet. On the drop-down menu hit the Add-Ins and the Manage dialogue box will appear. On the box select the Excel Add-Ins, hit Go, and the Add-Ins window will appear. On the window click the Analysis ToolPak options and hit OK.

After enabling the Analysis ToolPak Add-Ins you can now start by trying one of the Financial Functions of Excel which is the EFFECT Function. This function is used for the computation of the yearly interest fee for an actual interest fee with the combined periods every year.

The syntax of the EFFECT function is EFFECT(nominal_rate, npery). The argument which is nominal_rate must be a number between 0 and 1. The argument npery in the syntax must be an integer in the positive form. This positive integer is the combined periods every year.

To try the EFFECT function, open first an Excel spreadsheet and enable the Analysis ToolPak. In cell A1 input the formula =EFFECT(10%, 4) and the results on the cell A1 will appear 10.38%. Another example, in cell A2 input the formula =EFFECT(2.5%, 2) and the result will be 2.52%.

Two of the most common errors that occur in the EFFECT Function is the #NUM! error and the #VALUE! error. The #NUM! error occurs when the argument which is the nominal_rate has a value of less than zero and more than one, also, if the value of the argument npery is lesser than one the error #NUM! will also occur. If the values given in the argument of the EFFECT Function is non-numeric, then the #VALUE! will occur.

To avoid any result in decimal point or in 0% you have to format the cells that contain the EFFECT Function. To format the cells first, select the cell that has the function and hit the right click on your mouse. On the drop-down list hit the Format Cells and select the Number tab. Under the heading Category select the Percentage option. After doing so, on the right box with the title Decimal Places change the values to 2 or to the value that suits your computation.

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