Modern Finance RateEffectiveFromNominal

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RateEffectiveFromNominal

Returns what a quoted annual rate really earns in a year once it compounds.

Syntax

RateEffectiveFromNominal( nominalAnnual, compounding )

Examples

#import "std/money"
using money

'' What a quoted rate actually earns over a year once it compounds.
dim as Decimal j = DecimalParse( "0.0595" ).Value( )

'' Semi-annual: ( 1 + j/2 )^2 - 1, and the expansion terminates, so this
'' is exact to the last digit.
print RateEffectiveFromNominal( j, COMPOUND_SEMIANNUAL ).Value( ).ToString( )  '' 0.0603850625

'' More frequent compounding earns more on the same quoted rate.
print ( RateEffectiveFromNominal( j, COMPOUND_MONTHLY ).Value( ) > _
        RateEffectiveFromNominal( j, COMPOUND_SEMIANNUAL ).Value( ) )         '' true

'' Annual compounding is the identity.
print ( RateEffectiveFromNominal( j, COMPOUND_ANNUAL ).Value( ) = j )         '' true

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Library: Finance
Category: Finance
Documented under: Nothing Becomes A Keyword
Source: pkg/std/money/fincore.tiko in the tiko repository.