effective annual rate (EAR)
[ih-FEK-tiv AN-yoo-ul reyt]
nounpl: effective annual rates
taxa efetiva anual (TEA)
1. The actual annual interest rate that accounts for compounding periods within a year, showing the true cost of borrowing or true yield on an investment
If a savings account offers 6% interest compounded monthly, the effective annual rate would be approximately 6.17%.
Se uma conta poupança oferece 6% de juros compostos mensalmente, a taxa efetiva anual seria aproximadamente 6,17%.
2. A standardized measure used to compare financial products with different compounding frequencies on an equal basis
Banks must disclose the EAR to help consumers compare different loan and savings products fairly.
Os bancos devem divulgar a TEA para ajudar os consumidores a comparar diferentes produtos de empréstimo e poupança de forma justa.
In both Brazilian and American financial contexts, the EAR is a critical consumer protection tool mandated by financial regulators. In Brazil, the Central Bank (Banco Central do Brasil) requires disclosure of TEA on financial products. In the USA, the Truth in Lending Act (TILA) requires lenders to disclose APY or APR equivalents. Understanding EAR is essential for comparing mortgages, loans, credit cards, and savings accounts accurately.
Related Idioms & Phrases
compare apples to apples (when using EAR to compare different financial products)
the real cost of borrowing (referring to what EAR reveals versus nominal rates)
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