Finance interest: Difference between revisions

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https://www.educba.com/real-interest-rate-formula/
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Revision as of 03:41, 2 November 2021

Overview

TODO:

how are interest rates set?

Terminology

yield:
return:

nominal:
real:
effective:

Rate Types

Nominal Interest Rate

Does not account for inflation.

if nominal_rate == 5%:
    5$ interest on each 100$ paid

Calculation, and Terminology:

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)

https://www.educba.com/real-interest-rate-formula/

Real Interest Rate

Nominal interest rate, with the inflation-rate removed.
Emphasizes value at end of period.

Effective Interest Rate

Annual Interest Rate