When googling for Effective rates, i'm getting a different result for the formula compared to what we are using in our current company.
Google Result: Effective Annual Rate(EAR) = ((1+i/n)^n)-1
where i = annual interest rate
n = Compounding Periods
For Example for Quarterly EAR = ((1+.1/4)^4)-1
EAR = 10.381%
Company Formula Effective Rate = ((1 + Nominal_rate/Npery)^Npery)-1 where
Nominal_rate = annual rate / 12 if monthly; annual rate / 4 if quarterly
Npery = 12/x where x = 12 if Monthly; x = 4 if Quarterly
For Example For a Quarterly payment frequency and a 10% rate
Nominal Rate = 10%/4 = 2.5%
When using the company formula
Npery = 12/4(since Quarterly) = 3
Effective Rate = ((1 + 0.025/3)^3)-1
Effective Rate = 2.521%
The question is, which one is more appropriate to use?
I do not understand your implementation of the company method.
If the nominal annual rate is $10\%$ and gets applied as $2.5\%$ charged at the end of each quarter (so four times a year) then I would have thought
Npery$=4$Nominal_rate$=10\%=0.1$Nominal_rate/Npery$=2.5\%=0.025$EAR =((1 + Nominal_rate/Npery)^Npery)-1$= ((1 + 0.1/4)^4)-1 \approx 0.10381 =10.381\%$as in your initial calculation. An Effective Annual Rate of about a quarter of the nominal annual rate is implausible.