Quarterly rate: Difference between revisions
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imported>Doug Williamson (Note expressly that 1.5% is the periodic rate.) |
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The quarterly rate of interest (or yield) is a quoting convention for the simple interest ''nominal annual rate'' for compounding once per quarter (four times per year). | The quarterly rate of interest (or yield) is a quoting convention for the simple interest ''nominal annual rate'' for compounding once per quarter (four times per year). | ||
Coupon rates on instruments paying interest four times per year are often expressed as quarterly rates. | |||
This makes rates broadly comparable, while also enabling the amounts of fixed interest payments and receipts to be determined easily. | |||
'''Example''' | |||
If the quoted quarterly rate is 6.00%, | |||
the amount of interest compounded every three months is: | |||
= 6.00% / 4 | |||
= 1.50%. | |||
Not to be confused with the related ''annual effective'' rate, which in this case is: | |||
= 1.015<sup>4</sup> - 1 | |||
= 6.14%. | |||
The periodic rate per three months in this case is 1.5%. | |||
== See also == | == See also == | ||
* [[ | * [[Effective annual rate]] | ||
* [[Nominal annual rate]] | * [[Nominal annual rate]] | ||
* [[Periodic rate of interest]] | * [[Periodic rate of interest]] | ||
* [[Semi-annual rate]] | |||
[[Category:Manage_risks]] | |||
Latest revision as of 22:41, 28 January 2016
The quarterly rate of interest (or yield) is a quoting convention for the simple interest nominal annual rate for compounding once per quarter (four times per year).
Coupon rates on instruments paying interest four times per year are often expressed as quarterly rates.
This makes rates broadly comparable, while also enabling the amounts of fixed interest payments and receipts to be determined easily.
Example
If the quoted quarterly rate is 6.00%,
the amount of interest compounded every three months is:
= 6.00% / 4
= 1.50%.
Not to be confused with the related annual effective rate, which in this case is:
= 1.0154 - 1
= 6.14%.
The periodic rate per three months in this case is 1.5%.
