Interest Rates Over Different Time Periods and Effective Interest Rates (VCE SSCE General Mathematics): Flashcards

The quoted annual interest rate

How often interest is calculated and added to balance

$p = 12$

$p = 4$

$p = 52$

Divide by $p$: rac{ ext{Nominal rate}}{p}

R = 1 + rac{r}{100 imes p}

Actual % increase over one year, accounting for compounding

[(1 + rac{r}{100 imes n})^n - 1] imes 100%

Lower effective interest rate