NOMINAL Excel Formula

Author Zaheer    Category Formulas     Tags ,

One of the fields that use Microsoft Excel a lot is the field of business especially in financing and accounting. Excel is equipped with numerous powerful functions and formulas that are useful to this area. One of the accounting functions that are incorporated in Excel is the NOMINAL function. A good way to start learning about this function is to know its basic description. So, what is NOMINAL function?

What is the NOMINAL Function in Microsoft Excel?

The NOMINAL function in Excel is used to return the nominal rate of interest for a supplied number of compounding periods per year and effective interest rate. The formula of the NOMINAL function is:

NOMINAL (effect_rate, npery)

The arguments in this formula are the following:

  • Effect_rate – This is a required argument and it refers to the effective interest rate (a number between 0 and 1).
  • npery – This argument should be an integer that carries a positive sign and it refers to the number of compounding periods per year.

Remarks on the NOMINAL Function in Excel

  • In Excel version of 2007 as well as in later versions, this function is available as standard and has been impassive from the Analysis ToolPak add-in.
  • In Excel version of 2003, you can only use the NOMINAL function when the Analysis ToolPak add-in is enabled.
  • This specific function is almost connected to the function called as EFFECT function in Excel.
  • The nominal rate of interest is also referred to as the stated rate.
  • The #VALUE! error value is displayed
  • In case any of the supplied argument are non-numeric.
  • The “effect_rate” argument can also be supplied with as a decimal or with a percentage sign.
  • The #NUM! Error value is displayed if the “effect_rate” argument is equal to zero (0).
  • The “npery” argument is truncated if it is not an integer.
  • The #NUM! Error value is displayed if the “npery” argument is less than 1.

Some Examples on How to Use the NOMINAL Function in Excel

Here are some examples that will learn easily about the usage of the function:

  • Take for instance that you have an effective rate of interest of 5% and let’s calculate for the nominal interest rate compounded annually. Type in this formula of NOMINAL function in cell A1 and then supply the necessary arguments, =NOMINAL (5%, 1). The function will return the result which is 5.000%.
  • Here’s another one, for example, 5.062% is the effective interest rate and you wish to calculate for the nominal interest rate compounded semi-annually. Enter this formula in cell A2, =NOMINAL (5.062%, 2). The function will return the result which is 5.000%.
  • If you want to calculate for the nominal interest rate compounded monthly on an effective interest rate of 5.116%, type in this formula in cell A3, =NOMINAL(5.116%, 12). The function will return the result which is 5.000%.
  • Finally, 5.127% is the effective interest rate and you wish to compute for the nominal interest rate compounded daily. Enter this formula in cell A4, =NOMINAL (5.127%, 365). The function will return the same result which is 5.000%.

Hopefully, this article has helped you a lot with the provided description of the NOMINAL function and you can try the examples that were given above in your blank Excel spreadsheet so you can practice on how to use the function.

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