Effective interest rate for periodic compounding
Input(s)
\(\mathrm{m}\): Number of Compounding Periods Per Year (for example, 12 for Monthly Compounding) (time)
\(i_{n}\): Nominal Interest Rate (fraction)
Output(s)
\(i_{e}\): Effective Interest Rate (fraction)
Formula(s)
\[
\mathrm{i}_{\mathrm{e}}=\left(1+\frac{\mathrm{i}_{\mathrm{n}}}{\mathrm{m}}\right)^{\mathrm{m}}-1
\]
Reference(s)
Mian, M. A. 2011. Project Economics and Decision Analysis Volume 1: Deterministic Models, Second Edition. Tulsa, Oklahoma: PennWell Corporation. Chapter 2, Page: 43.