Annual compound interest rate equivalent to a periodical compound interest rate formula

Tags: interest rates methodology time value of money

Description of the Annual compound interest rate equivalent to a periodical compound interest rate formula

Formula for the calculation of an annual compound interest rate which is equivalent to a periodical compound interest rate.

r_{a} = {(1 + r_{m})}^{m} - 1

m

Number of discount periods per year

r_{m}

Periodic interest rate for a period of 1/m years