Management and Organizational Studies 2310A/B Lecture Notes - Lecture 10: Special Functions, Effective Interest Rate, Compound Interest

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 2310A/B
• Professor: Jun Wang

Document Summary

This is the annual rate that is quoted by law. By definition apr = period rate times the number of periods per year equation: Consequently, to get the period rate we rearrange the apr. You should never divide the effective rate by the number of: period rate = apr / number of periods per year periods per year it will not give you the period rate. You need an apr based on semi-annual compounding to find the semi-annual rate. You always need to make sure that the interest rate and the rate: if you are looking at annual periods, you need an annual, if you are looking at monthly periods, you need a monthly. If you have an apr based on monthly compounding, you have to use monthly periods for lump sums, or adjust the interest rate appropriately if you have payments other than monthly rate. Rearrange the ear equation and you get: apr = m [(1+ear)^1/m 1]