The Effective Annual Interest Rate is a measure of interest that incorporates the compounding of interest and is frequently used to compare financial loans with different compounding terms.
The effective annual interest rate is calculated using the following equation:
where nominal_rate is the nominal interest rate and npery is the number of compounding periods per year.
For further details, see the Wikipedia Effective Interest Rate PageThe Excel Effect function returns the effective annual interest rate for a given nominal interest rate and number of compounding periods per year.
The syntax of the function is:
where the arguments are as follows:
nominal_rate    The nominal interest rate (must be a numeric value, between 0 and 1). 
npery    The number of compounding periods per year (must be a positive integer). 
The spreadsheet below shows three examples of the Excel Effect Function:
Formulas:

Results:

If the result from your Effect function is displayed as a decimal, or shows 0%, both of these problems are likely to be due to the formatting of the cell containing the Effect function.
Therefore the problem can be fixed by formatting the cell as a percentage, with decimal places.
To do this:
Open up the 'Format Cells' dialog box using any one of the following methods:
Within the 'Format Cells' dialog box:
Select Percentage from the Category list on the left side of the dialog box.
This will cause further options to appear on the right hand side of the control box, which allow you to select the number of decimal places that you want to be displayed (see rightabove).Further details of the Excel Effect function are provided on the Microsoft Office website.
If you get an error from the Excel Effect function this is likely to be one of the following:
#NUM!   
Occurs if either:

#VALUE!    Occurs if one or both of the supplied arguments are nonnumeric. 