Difference between revisions of "Documentation/How Tos/Calc: EFFECT ADD function"
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| − | __NOTOC__ | + | {{DISPLAYTITLE: EFFECT_ADD function}} |
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== EFFECT_ADD == | == EFFECT_ADD == | ||
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=== Issues: === | === Issues: === | ||
* According to the draft ODFF standard, this function will be replaced with a new '''EFFECT''' function. | * According to the draft ODFF standard, this function will be replaced with a new '''EFFECT''' function. | ||
| − | * The calculation assumes that interest is credited at the end of exactly equal periods. In reality different quarter-years, for example, have different numbers of days. | + | * The calculation assumes that interest is credited at the end of exactly equal periods. In reality, different quarter-years, for example, have different numbers of days. |
| − | {{ | + | {{SeeAlso|EN| |
* [[Documentation/How_Tos/Calc: EFFECTIVE function|EFFECTIVE]] | * [[Documentation/How_Tos/Calc: EFFECTIVE function|EFFECTIVE]] | ||
* [[Documentation/How_Tos/Calc: NOMINAL function|NOMINAL]] | * [[Documentation/How_Tos/Calc: NOMINAL function|NOMINAL]] | ||
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* [[Documentation/How_Tos/Calc: Functions listed alphabetically|Functions listed alphabetically]] | * [[Documentation/How_Tos/Calc: Functions listed alphabetically|Functions listed alphabetically]] | ||
* [[Documentation/How_Tos/Calc: Functions listed by category|Functions listed by category]]}} | * [[Documentation/How_Tos/Calc: Functions listed by category|Functions listed by category]]}} | ||
| − | [[Category: Documentation/Reference/Calc]] | + | [[Category: Documentation/Reference/Calc/Financial functions]] |
Latest revision as of 10:55, 31 January 2024
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EFFECT_ADD
Returns the effective compounded interest rate given a nominal interest rate.
Syntax:
EFFECT_ADD(nom_rate; num)
- nom_rate: the nominal interest rate.
- num: the number of times interest is credited / compounded during the period that nom_rate applies to.
- If an investment has a nominal rate, say for a year, but interest is paid and credited say each quarter, the interest paid each quarter will itself start earning interest. This increases the effective value. This function returns the effective rate - that is, the rate that would have to be paid at the end of the (say) year to give the same return.
- The formula used is:
- effective_rate = (1 + nom_rate/num)num - 1
Example:
EFFECT_ADD(0.06; 4)
- returns approximately 0.0614, which is the effective rate of an investment with a nominal rate of 6% per annum, compounded quarterly.
Issues:
- According to the draft ODFF standard, this function will be replaced with a new EFFECT function.
- The calculation assumes that interest is credited at the end of exactly equal periods. In reality, different quarter-years, for example, have different numbers of days.
See Also
