Calculator Use
Use this calculator to calculate P, the effective interest rate for each compounding period. P = R/m where R is the annual rate. For example, you want to know the daily periodic rate for a credit card that has 18% annual interest; enter 18% and 365.
- Interest Rate (R)
- is the nominal interest rate or "stated rate" in percent. r = R/100
- Compounding Periods (m)
- is the number of times compounding will occur during a period.
- Periodic Interest Rate (P)
- This is the rate per compounding period, such as per monthwhen your period is year and compounding is 12times per year.
Interest rate can be for any period not just a year as long as compounding is per this same time unit. For example, your stated rate is 9% per quarter compounded monthly. Enter 9% and 3 (for 3 months per quarter to get P = 3%, the effective rate per month. Side Note: the effective rate calculation tells us the effective rate per quarter in this case is 9.2727%.
