How to Calculate Effective Interest Rate
Familiarize yourself with the concept of the effective interest rate.. Determine the stated interest rate.. Determine the number of compounding periods for the loan.
Steps
Familiarize yourself with the concept of the effective interest rate.
Familiarize yourself with the concept of the effective interest rate.
Determine the stated interest rate.
Determine the stated interest rate.
Determine the number of compounding periods for the loan.
Determine the number of compounding periods for the loan.
Familiarize yourself with the formula for converting the stated interest rate to
Familiarize yourself with the formula for converting the stated interest rate to the effective interest rate.
Calculate the effective interest rate using the formula above.
Calculate the effective interest rate using the formula above.
Familiarize yourself with the formula used in case of continuously compounding i
Familiarize yourself with the formula used in case of continuously compounding interest.
Calculate the effective interest rate in case of continuously compounding intere
Calculate the effective interest rate in case of continuously compounding interest.
After reading and fully understanding the theory, calculation can be simplified
After reading and fully understanding the theory, calculation can be simplified in the following way.
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