Calculating interest rates when compounding period differs from payment frequency

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@Bob.... The answer is "maybe".

First, as with most questions, quicker and more constructive answers come if you post concretes examples.

Ideally, attach an example Excel filie, as explained in the bright yellow banner at the top of the webpage (hard to miss, eh?).

But at a minimum, post numbers (with sufficient precision) and formulas, ideally identifying their cell references.

Second, we might need to know how an annual rate is coverted to a sub-annual rate.

For example, if the annual rate is 12%, is the monthly rate 12%/12, or is it (1+12%)^(1/12) - 1?

(And then there's Canada. Sigh.)

Careful: terminology in the lending industry can be misleading. They might refer to "compounded interest", but that does not necessarily mean that the periodic interest rate is compounded.

If the monthly rate is 12%/12 (1%), compounded, the quarterly rate is (1+12%/12)^3 - 1.

(Of course, if you know the monthly rate, regardless of how it is calculated, simply substitute it for 12%/12).

If the monthly rate is (1+12%)^(1/12) - 1, compounded, the quarterly rate is (1+12%)^(3/12) - 1.

Guys, thanks for the input on this, but perhaps you missed that this thread is almost 17 years old? I doubt the OP is still waiting for the answer.

Originally Posted by FDibbins

Guys, thanks for the input on this, but perhaps you missed that this thread is almost 17 years old? I doubt the OP is still waiting for the answer.

Indeed! If he has been waiting 17 years then I dread to think how much compound interest he may have foregone in the meantime.

Originally Posted by Richard Buttrey

Indeed! If he has been waiting 17 years then I dread to think how much compound interest he may have foregone in the meantime.

Not to mention the amount of cobwebs accumulated between the floor, table and his chin? LOL

No harm. I think we've all done it at one time or another. I know I have.