Effective interest rate

effective interest rate method of amortization
The preferred method for systematically moving bond discount or premium from the balance sheet over to interest expense on the income statement over the life of the bond.

effective interest rate = (1+i/n)n-1
where i is the nominal rate, and n is the number of compounding periods.
For example, a nominal interest rate of 7% compounded quarterly will be calculated as: ...

effective interest rate
yield to maturity .
real rate of interest on a loan equal to the nominal interest divided by the proceeds of the loan. Assume a company took out a $10,000, one-year, 10% discounted loan.

Effective Interest Rate
Business Dictionary:
Effective (Interest) Rate
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EFFECTIVE INTEREST RATE - The cost of credit on a yearly basis expressed as a percentage. Includes up-f...
EFFECTIVE MARGIN - The effective margin is the average spread over the underlying index that the invest...

Effective Interest Rate
Real rate of interest on a loan which is the coupon rate divided by the net proceeds of the loan.
Effective Opening
Smallest diameter of piping at the point of discharge.

Effective Interest Rate (Real Estate): A variable interest rate translated into the rate that would be paid if the interest was compounded on a semi-annual basis.

Effective Interest Rate
The rate of interest actually earned on an investment. It is
calculated as the ratio of the total amount of interest actually
earned for one year divided by the amount of the principal.

Effective Interest Rate = interest rate stated as a yearly rate and compounded yearly.
Economic Decision Making = selecting the best of competing alternatives according to economic criteria.

Effective Interest Rate
The annual rate at which an investment grows in value when interest is credited more often than once a year.

Effective Interest Rate
The actual annual interest rate that accrues, after taking into consideration the effects of compounding.

EFFECTIVE INTEREST RATE - The rate of earning on a bond investment based on the actual price paid for the bond, the coupon rate, the maturity date and the length of time between interest dates, in contrast with the nominal interest rate.

Effective interest rate
The effective interest rate is the real rate of interest paid or earned on a loan. It is the discount rate that equates the payment stream to the net proceeds.
Effective tax rate ...

The effective interest rate per year is
i = er âˆ' 1
Using this i the amount function can be written as: ...

The monthly effective interest rate. For example, the periodic rate on a credit card with an 18% annual percentage rate is 1.5% per month.

Finally, the effective interest rate (sometimes known as the annual equivalent rate, or AER) is a rate that takes account of the impact of compounding.
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The size of the discount determines the effective interest rate on the bill. For instance, a dealer might offer a bill with 120 days left until maturity at a yield of 7.48 percent.

The average effective interest rate on unsecured overnight lending reported by the banks on the Euribor panel, weighted by the volume of overnight lending. It is published the following day by Bridge-Telerate.

Interest rate
The monthly effective interest rate. For example, the periodic rate on a credit card with an 18% annual percentage rate is 1.5% per month.

In name only. Differences in compounding cause the nominal rate to differ from the effective interest rate. inflation causes the purchasing power of money to differ from one time to another. ...

Annual Percentage Rate (APR). The effective interest rate required to be disclosed under the Truth in Lending Act.

Differences in compounding cause the nominal rate to differ from the effective interest rate. Definition: rd=Inflation"Inflation causes the purchasing power of money to differ from one time to another.

These agreements can be viewed as loans secured against the security. The effective interest rate is called the repo rate.

Yield to maturity (YTM) - Refers to the effective rate on a bond; also called the effective interest rate.

Buydown - A financing technique used to reduce the monthly payments due on a loan for a certain period of time. Funds are given to the lender in order to buy down or lower the effective interest rate paid by the buyer, ...

Treasury bills are issued by the Government. Bills don't have an interest rate, but, allow the buyer to repurchase at a discount and this discount is the effective interest rates.

A requirement by some banks that a borrower maintain a minimum balance in a checking or savings account as a condition of a loan. The offsetting balance increases the effective interest rate to the bank since the net amount loaned is reduced but the ...

A loan in which the calculated interest payment is subtracted or discounted in advance. Because this lowers the amount of available funds, the effective interest rate is increased.

property seller (or other party) deposits money to an account so that it can be released each month to reduce the mortgagor's monthly payments during the early years of a mortgage. During the specified period, the mortgagor's effective interest rate ...

the expected change in the cash flow caused by the option. Measures the responsiveness of a bond's price-taking into account that expected cash flows will change as interest rates change due to the embedded option.
Effective Interest Rate ...

a proportion of a loan that a borrower draws is required to be held on deposit at the lending FI (typically in a zero or low interest account). The effect is to lower the total amount at risk to the FI while raising the effective interest rate.

44% and the 30-year yields 4.65%. This is strange because usually investors expect to earn much higher interest on a 10-year investment compared to a daily investment. (Note, a yield is an effective interest rate) ...

See also: Banks, Fraud, Expense, Prepayment, Refinance