Question

if I wanna find the effective interest rate, why do I have to subtract 1 from the formula (1+r/n)^n ?

Answer 1

because int rate refers to percentage of increase
the formula is called the growth factor
ex:
if int rate was 0 there is no growth right so each period you would multiply by 1
1-1 = 0
in same way, int rate of 10% has growth factor of 1.1
1.1 - 1 = .1

Answer 2

oh, thanks..