Nominal Interest Rate Compounded Continuously. The effective interest rate is the interest rate on a loan or financial product restated from the nominal interest rate as an interest rate with annual compound interest payable in arrears. Annual effective rate and continuously compounded rates.
6 annually is credited as 6 12 0 5 every month. Enter c c or continuous for m. It is used to compare the annual interest between loans with different compounding terms daily monthly quarterly semi annually annually or other.
Continuous compounding is when the frequency of compounding m is increased up to infinity.
Compounding periods m is the number of times compounding will occur during a period. Effective interest rate i. If you invest 2 000 at an annual interest rate of 13 compounded continuously calculate the final amount you will have in the account after 20 years. Bond available at 8 is a coupon rate as it does not consider current inflation this face interest of 8 is the nominal rate.
