Quarterly rate: Difference between revisions
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imported>Doug Williamson (Link with Effective annual rate page.) |
imported>Doug Williamson (Note expressly that 1.5% is the periodic rate.) |
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| Line 11: | Line 11: | ||
If the quoted quarterly rate is 6.00%, | If the quoted quarterly rate is 6.00%, | ||
the amount of interest compounded | the amount of interest compounded every three months is: | ||
= 6.00% / 4 | = 6.00% / 4 | ||
| Line 23: | Line 23: | ||
= 6.14%. | = 6.14%. | ||
The periodic rate per three months in this case is 1.5%. | |||
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%.
