EFFECTIVE RATE OF INTEREST
Instructions: Familiarize yourself with the following
terms. Be certain that you know the definition of each
term and where it corresponds in the Effective Rate
Formula.
r eff = (1 + r/m)m -1
reff = effective rate of interest.
r = the nominal rate of interest per year.
m = the number of conversion periods
per year.
r/m = the rate of simple interest
rate per conversion period.
Incremental Calculator
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Effective Interest Introduction
Chapter 5 Mathematics of Finance