Читать книгу Fundamentals of Financial Instruments - Sunil K. Parameswaran - Страница 85

Let us assume that an investor is being offered a nominal rate of r% per annum, and that interest is being compounded m times per annum. In the earlier example, since HSBC was compounding on a monthly basis, m was 12. The effective rate of interest i is therefore given by

We can also derive the equivalent nominal rate if the effective rate is given.

We have already seen how to convert a quoted rate to an effective rate. We will now demonstrate how the rate to be quoted can be derived based on the desired effective rate.

Assume that HSBC Bank wants to offer an effective annual rate of 12% per annum with quarterly compounding. The question is what nominal rate of interest should it quote?

In this case, i = 12%, and m = 4. We have to calculate the corresponding quoted rate r.

Thus, a quoted rate of 11.49% with quarterly compounding is tantamount to an effective annual rate of 12% per annum. Hence HSBC should quote 11.49% per annum.