Finance interest: Difference between revisions
From wikinotes
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== Nominal Interest Rate == | == Nominal Interest Rate == | ||
<blockquote> | <blockquote> | ||
<syntaxhighlight lang="yaml"> | |||
principal: amount lent | |||
compounding-period: interval that interest is added to the principal (ex: quarterly) | |||
periodic-return: percentage paid per compounding-period | |||
num-periods: number of periods until complete (or in observed timespan ex: 1yr) | |||
</syntaxhighlight> | |||
<math> | |||
\text{nominal-interest-rate} = | |||
( 1 + \text{periodic-return})^{ \text{num-periods} } | |||
- 1 | |||
</math> | |||
<syntaxhighlight lang="yaml"> | <syntaxhighlight lang="yaml"> | ||
nominal_rate = 5% | nominal_rate = 5% | ||
Revision as of 03:38, 2 November 2021
Overview
TODO:
how are interest rates set?
Terminology
yield: return: nominal: real: effective:
Rate Types
Nominal Interest Rate
principal: amount lent compounding-period: interval that interest is added to the principal (ex: quarterly) periodic-return: percentage paid per compounding-period num-periods: number of periods until complete (or in observed timespan ex: 1yr)
nominal_rate = 5% 5$ interest for each 100$
- Does not account for inflation
Real Interest Rate
Nominal interest rate, with the inflation-rate removed.
Emphasizes value at end of period.
Effective Interest Rate
Annual Interest Rate
