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Equivalent RatesThe Equivalent Rates calculation is used to find the nominal annual interest rate compounded n times a year equivalent to a given nominal rate compounded m times per year.

Two nominal rates with different compounding frequencies are equivalent if they yield the same amount of interest per year (and hence, at the end of any period of time).

Input• nominal annual rate for the given rate• compounding frequency for the given rate• compounding frequency for the equivalent rate

Results• equivalent nominal annual rate• equivalent periodic rate

Example

A bank offers 14.75 % compounded annually.

What would be the equivalent rate compounded monthly?InputGiven nominal annual rate:14.75 %Compounding frequency for given rate:annuallyCompounding frequency for equivalent rate:monthlyResultEquivalent nominal annual rate:13.8377 %

Answer: 13.8377%.

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13y ago

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