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


Not to be confused with the ''annual effective'' rate, which in this case would be = 1.05<sup>2</sup> - 1 = 10.25%.
 
 
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 ==
* [[Annual effective rate]]
* [[Effective annual rate]]
* [[Certificate in Treasury Fundamentals]]
* [[Certificate in Treasury]]
* [[Nominal annual rate]]
* [[Nominal annual rate]]
* [[Semi-annual basis]]
* [[Semi-annual basis]]
* [[Periodic rate of interest]]
* [[Periodic rate of interest]]
* [[Periodic yield]]
* [[Quarterly rate]]


[[Category:Debt_Capital_Markets]]
[[Category:Long_term_funding]]
[[Category:Cash_Management]]
[[Category:Manage_risks]]
[[Category:Interest_Rate_Risk]]
[[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%.


See also