Читать книгу Fundamentals of Financial Instruments - Sunil K. Parameswaran - Страница 86

Two nominal rates of interest compounded at different intervals of time are said to be equivalent if they yield the same effective interest rate for a specified measurement period.

Assume that ING Bank is offering 10% per annum with semiannual compounding. What should be the equivalent rate offered by a competitor, if it intends to compound interest on a quarterly basis?

The first step in comparing two rates that are compounded at different frequencies is to convert them to effective annual rates. The effective rate offered by ING is:

The question is, what is the quoted rate that will yield the same effective rate if quarterly compounding were to be used?

Hence 10% per annum with semiannual compounding is equivalent to 9.88% per annum with quarterly compounding, because in both cases the effective annual rate is the same.