| 释义 |
DictionarySeetax rateEncyclopediaSeeTax RateEffective Rate
Related to Effective Rate: Effective tax rateEffective RateAnother name for annual percentage rate that refers to the amount of yearly interest to be charged by a lender on the money borrowed by a debtor. In federal Income Tax law, the actual tax rate that an individual taxpayer pays based upon his or her taxable income. Federal income tax laws increase the rate of taxation as a taxpayer reaches certain marginal income levels. For example, taxpayers might pay a tax rate of 20 percent on the first $10,000 of taxable income. Thereafter, any increase in income up to an additional $5,000 might be taxable at a rate of 22 percent on that $5,000. The effective rate of tax is computed by dividing the total amount of tax paid by the total of the person's taxable income, adding the tax paid on the person's first $10,000 at a 20 percent rate to the tax paid on the next $5,000 that is at a 22 percent rate. The effective rate is not an average of the tax rates imposed since the average does not take into account the differences in the marginal income levels. A taxpayer's effective tax rate is, however, more than the person's bottom marginal rate but less than his or her top marginal rate. Effective rate
Effective rateA measure of the time value of money that fully reflects the effects of compounding.Effective Interest RateThe interest rate on a debt or debt security that takes into account the effects of compounding. For example, if one has a fixed-income investment such as certificate of deposit that pays 3% in interest each month, the effective interest rate is more than 3% because compounding the interest results in a (slightly) greater principal each month on which the interest rate is calculated. In this example, the effective interest rate is calculated thus:
Effective interest rate = (1 + .03/12)^12 - 1 = .0304 = 3.04%, where .03 is the simple interest rate and 12 is the number of times in a year interest is compounded. It is also known as the annual effective rate or the annual equivalent rate. See also: Stated annual interest rate, annual percentage yield.Effective RateThe interest rate adjusted for intra-year compounding.
Because interest on a mortgage is calculated monthly, a 6% mortgage actually has a rate of .5% per month. If there were no principal repayments the first year, $100 invested in a 6% mortgage would actually earn $6.17 of interest during the year because of reinvestment of monthly interest. The “effective rate” is thus 6.17%, while 6% is termed the “nominal” rate. Similarly, a 6% bond on which interest is paid quarterly has an effective rate of 6.14%. |