The yield on a debt instrument calculated from the purchase price. The effective rate on a bond is determined by the price, coupon rate, time until maturity and time between interest payments.
The actual annual interest rate that accrues after taking into consideration the effects of compounding (when compounding occurs more than once per year).
When compounding of interest occurs more than one time per year, the effective annual interest rate is the actual annual interest rate that accrues, after taking into consideration the effects of compounding.