Finance interest: Difference between revisions

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https://corporatefinanceinstitute.com/resources/knowledge/finance/effective-annual-interest-rate-ear/
https://corporatefinanceinstitute.com/resources/knowledge/finance/effective-annual-interest-rate-ear/
https://www.calculatorsoup.com/calculators/financial/effective-interest-rate-calculator.php
</blockquote><!-- Effective Interest Rate -->
</blockquote><!-- Effective Interest Rate -->



Revision as of 04:05, 2 November 2021

Overview

TODO:

how are interest rates set?

Terminology

yield:
return:

nominal:
real:
effective:

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)

Rate Types

Nominal Interest Rate

Does not account for inflation.

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

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

Real Interest Rate

Accounts for inflation.

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

Effective Interest Rate

Accounts for compounding interest (but not inflation?).

https://corporatefinanceinstitute.com/resources/knowledge/finance/effective-annual-interest-rate-ear/

https://www.calculatorsoup.com/calculators/financial/effective-interest-rate-calculator.php

Annual Interest Rate