Semi-annual basis and Semi-annual rate: Difference between pages

From ACT Wiki
(Difference between pages)
Jump to navigationJump to search
imported>Doug Williamson
(Colour change of example headers)
 
imported>Doug Williamson
(Link with Semi-annual basis page.)
 
Line 1: Line 1:
The quotation of a rate of return, or a cost, on the basis of a nominal annual rate for compounding twice per 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 10%, then the periodic interest accruing is 5% (= 10% x 6/12) per six month period.


<span style="color:#4B0082">'''Example'''</span>
A semi-annual rate is an example of a nominal annual rate.


'''Q.'''
Not to be confused with the ''annual effective'' rate, which in this case would be = 1.05<sup>2</sup> - 1 = 10.25%.
 
A rate of return - quoted as an annual effective rate - is 4.04%.
 
What is this same rate of return quoted on a semi-annual basis?
 
'''A.'''
 
The same rate of return quoted on a semi-annual basis is:
 
(1.0404<sup>(1/2)</sup> -1) x 2
 
= 4.00%.




== See also ==
== See also ==
* [[Semi-annual rate]]
* [[Annual effective rate]]
*[[Nominal annual rate]]
* [[Nominal annual rate]]
*[[Rate of return]]
* [[Semi-annual basis]]
* [[Periodic rate of interest]]


[[Category:Long_term_funding]]
[[Category:Debt_Capital_Markets]]
[[Category:Cash_management]]
[[Category:Cash_Management]]
[[Category:Interest_Rate_Risk]]

Revision as of 14:52, 19 October 2013

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 10%, then the periodic interest accruing is 5% (= 10% x 6/12) per six month period.

A semi-annual rate is an example of a nominal annual rate.

Not to be confused with the annual effective rate, which in this case would be = 1.052 - 1 = 10.25%.


See also