(12C) Annualised Equivalent Rate & Continuously Compounded Rate
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06-11-2019, 03:30 PM
Post: #1
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(12C) Annualised Equivalent Rate & Continuously Compounded Rate
Often the interest rate given is the nominal rate that compounds a given number of times in the year. I want a very quick way to calculate the annualised equivalent rate (AER) which is the same rate that compounds only once a year (often this is what banks quote as regulatory authorities mandate them to as the public understand 8.3% AER versus 8% APR compounded, say, monthly during the year. Also options and some other derivatives use the continuously compounded rate CCR (the asymptotic limit going from compounding once a year to monthly, to weekly, to daily, to hourly etc.). So the program will also calculate this also. I want to avoid using other registers, if possible, so it's a bit longer than necessary (e.g. the 100's being entered below!) as I don't want it to disturb a cashflow sequence entered into the calculator. {I'm intending to attempt the CFA exams and anything that adds to speed is a good :-) Can't figure out how to post smiley's to this! :-( }
The other permitted calculator (TI BA II Plus) has a sheet to do this but the HP12C will have significantly lower keystrokes as only have to input n (number of compounding periods per year) and i (the nominal rate) and then R/S. TI doesn't calculate the CCR on that sheet. AER is output to X and CCR to Y. For example (rounded to 2 decimal places): i = 8% APR compounded monthly AER = 8.30% CCR = 8.33% Let me know if you spot any problems in it. Regards, Joe Code:
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Messages In This Thread |
(12C) Annualised Equivalent Rate & Continuously Compounded Rate - Joe_H - 06-11-2019 03:30 PM
RE: (12C) Annualised Equivalent Rate & Continuously Compounded Rate - Carsen - 06-11-2019, 06:32 PM
RE: (12C) Annualised Equivalent Rate & Continuously Compounded Rate - Joe_H - 06-11-2019, 10:42 PM
RE: (12C) Annualised Equivalent Rate & Continuously Compounded Rate - SlideRule - 06-12-2019, 03:20 PM
RE: (12C) Annualised Equivalent Rate & Continuously Compounded Rate - Joe_H - 06-12-2019, 04:37 PM
RE: (12C) Annualised Equivalent Rate & Continuously Compounded Rate - Joe_H - 06-13-2019, 03:22 PM
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