Читать книгу Fundamentals of Financial Instruments - Sunil K. Parameswaran - Страница 127

Mary has borrowed money from a bank, which is quoting a rate of 6.4% per annum compounded quarterly. To calculate the effective annual rate, we use an Excel function called EFFECT. The parameters are:

 Nominal_rate: This is the nominal rate of interest per annum.

 Npery: This is the frequency of compounding per annum.

The nominal rate is 6.40% or 0.064 in this case. The frequency of compounding per annum is 4. Using the function, we get the effective annual rate of 6.5552% per annum.

If we are given the effective rate, we can compute the equivalent nominal rate using the NOMINAL function in Excel. The parameters are

 Effect_rate: This is the effective rate of interest per annum.

 Npery: This is the frequency of compounding per annum.

Assume that the bank is quoting an effective annual rate of 7.2% per annum with quarterly compounding. What is the equivalent nominal annual rate? In this case the effective rate is 7.20%, and the frequency of compounding is 4. Thus,