Semi-annual rate: Difference between revisions
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The semi-annual rate is the simple annual interest quotation for compounding twice a year. | The semi-annual rate is the simple annual interest quotation for compounding twice a year. | ||
For example if the semi-annual rate is quoted as | Coupon rates on bonds paying interest twice per year are generally expressed as semi-annual rates. | ||
This makes rates broadly comparable, while also enabling the amounts of fixed interest coupons to be determined easily. | |||
<span style="color:#4B0082">'''Example: Semi-annual rate calculation'''</span> | |||
For example if the semi-annual rate is quoted as 4%, then the periodic interest accruing is: | |||
= 4% x (6/12) | |||
= 2% per six month period. | |||
A semi-annual rate is an example of a nominal annual rate. | A semi-annual rate is an example of a nominal annual rate. | ||
The semi-annual rate is not to be confused with the <i>periodic</i> rate per 6 months, which in this case is 2%. | |||
Nor should it be confused with the related <i>annual effective</i> rate, which in this case would be: | |||
= 1.02<sup>2</sup> - 1 | |||
= 4.04%. | |||
== See also == | == See also == | ||
* [[ | * [[Effective annual rate]] | ||
* [[Certificate in Treasury Fundamentals]] | |||
* [[Certificate in Treasury]] | |||
* [[Nominal annual rate]] | * [[Nominal annual rate]] | ||
* [[Semi-annual basis]] | |||
* [[Periodic rate of interest]] | * [[Periodic rate of interest]] | ||
* [[Periodic yield]] | |||
* [[Quarterly rate]] | |||
[[Category: | [[Category:Long_term_funding]] | ||
[[Category:Manage_risks]] | |||
[[Category:Cash_management]] | |||
Latest revision as of 14:12, 16 November 2016
The semi-annual rate is the simple annual interest quotation for compounding twice a year.
Coupon rates on bonds paying interest twice per year are generally expressed as semi-annual rates.
This makes rates broadly comparable, while also enabling the amounts of fixed interest coupons to be determined easily.
Example: Semi-annual rate calculation
For example if the semi-annual rate is quoted as 4%, then the periodic interest accruing is:
= 4% x (6/12)
= 2% per six month period.
A semi-annual rate is an example of a nominal annual rate.
The semi-annual rate is not to be confused with the periodic rate per 6 months, which in this case is 2%.
Nor should it be confused with the related annual effective rate, which in this case would be:
= 1.022 - 1
= 4.04%.
