EffectiveInterest

EffectiveInterest[r,q]
gives the effective interest rate corresponding to interest specification r, compounded at time intervals q.

Details and OptionsDetails and Options

  • EffectiveInterest returns an expression suitable for use in TimeValue.
  • EffectiveInterest works with numerical or arbitrary symbolic expressions.
  • Symbolic expressions returned by EffectiveInterest can be solved for nominal rates, compounding periods or time parameters.
  • In EffectiveInterest[r,q], the interest r can be specified in the following forms:
  • rnominal interest rate
    {r1,r2,}schedule of rates applied over unit time intervals
    {{t1,r1},{t2,r2},}schedule of forward rates changing at the specified times
    {p1->r1,p2->r2,}term structure of interest rates
  • EffectiveInterest[r,q] returns an expression in the same form as r.
  • EffectiveInterest[r,0] specifies continuous compounding.
  • EffectiveInterest[{r1,r2,}] gives the compounded average growth rate (CAGR) corresponding to the rate schedule .
  • EffectiveInterest[{p1->r1,p2->r2,}] gives the equivalent schedule of future spot rates.

ExamplesExamplesopen allclose all

Basic Examples  (7)Basic Examples  (7)

Effective rate corresponding to a nominal rate of 5% compounded 4 times per period:

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Schedule of nominal rates to effective rates, compounded 12 times per period:

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Convert a schedule of nominal rates to effective rates compounded 12 times per period:

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Compound annual growth rate (CAGR) corresponding to a schedule of rates:

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Convert a term structure of interest rates (yield curve) to a list of implied forward rates and the corresponding intervals over which they are valid:

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Solve for the nominal rate corresponding to an effective rate of 5% compounded quarterly:

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Use EffectiveInterest with TimeValue:

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Introduced in 2010
(8.0)