The Annual Equivalent Rate (AER) is the rate that shows what the interest rate would be if interest were paid and compounded once each year. This is a standard way of showing the interest rate so that you can compare products easily. The AER is always lower than the interest rate.
What effective rate is equivalent to a simple interest rate of 12% on a year transaction?
Assuming that you are asking about an investment or savings account:
A simple interest rate of 12% is the same as an effective annual rate of 12.68%. This is because with simple interest, you only earn interest on the principal amount of the investment. With an effective annual rate, you earn interest on the principal plus any interest that has been earned in previous periods. What does 3% AER mean? 3% AER, or Annual Equivalent Rate, is the interest rate you would receive if you deposited money into a savings account and left it there for a year. This is a way of expressing the interest rate on a yearly basis, even if you are only getting paid interest every month. What is an example of equivalent rate? An equivalent rate is one that is equal to or greater than the rate offered by the account holder's current financial institution. For example, if a savings account offers a 1% interest rate and the account holder's current bank offers a 2% interest rate, the account holder would be better off switching to the new bank. Whats the difference between APR and AER? The Annual Percentage Rate (APR) is the rate of interest you will be charged on your loan each year. The Annual Equivalent Rate (AER) is the rate of interest you will be paid on your savings each year.
Is AER paid monthly or annually? AER, or Annual Equivalent Rate, is the rate of interest paid on a savings account on an annual basis, taking into account the effect of compounding. In other words, it is the interest rate that would be paid if the interest was not reinvested and was paid out at the end of each year.