Effective interest rate

1.
In relation to a financial asset or financial liability, the internal rate of return of the cash flows of the instrument, including the initial cost and the final maturity amount.

2.
A hedged interest rate achieved, after interest rate risk management.
For example, the hedged interest rate achieved when hedging an interest rate exposure with an FRA.

3.
Annual effective rate.

See also

• Effective interest method
• Effective rate of interest
• Internal rate of return
• Annual effective rate
• FRA