Difference between revisions of "Documentation/How Tos/Calc: NOMINAL ADD function"
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[[Documentation/How_Tos/Calc: Financial functions|'''Financial functions''']] | [[Documentation/How_Tos/Calc: Financial functions|'''Financial functions''']] | ||
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| + | [[Documentation/How_Tos/Calc: Functions listed alphabetically|'''Functions listed alphabetically''']], | ||
| + | [[Documentation/How_Tos/Calc: Functions listed by category|'''Functions listed by category''']] | ||
=== Issues: === | === Issues: === | ||
* 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. | ||
Revision as of 06:13, 13 September 2008
NOMINAL_ADD
Returns a nominal interest rate given the effective compounded interest rate.
Syntax:
NOMINAL_ADD(eff_rate; num)
- eff_rate: the effective interest rate.
- num: the number of times interest is credited / compounded during the period that the nominal 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. The effective rate is the rate that would have to be paid at the end of the (say) year to give the same return.
- Given an effective rate, this function returns the appropriate nominal rate.
- The formula used is:
- eff_rate = ( (1 + nom_rate/num)^num ) - 1, therefore
- nom_rate = num[(1 + eff_rate)^(1/num) - 1]
Example:
NOMINAL_ADD(0.06; 4)
- returns approximately 0.0587, which is the nominal rate for an investment with a effective rate of 6% per annum, compounded quarterly.
See also:
NOMINAL EFFECTIVE, EFFECT_ADD,
Derivation of Financial Formulas
Functions listed alphabetically, Functions listed by category
Issues:
- 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.
