Evaluates the effective annual interest rate.
Synopsis
#include <imsl.h>
float imsl_f_effective_rate (float nominal_rate, int n_periods)
The type double function is imsl_d_effective_rate.
Required Arguments
float nominal_rate
(Input)
The interest rate as stated on the face of a security.
int n_periods
(Input)
Number of compounding periods per year.
Return Value
The effective annual interest rate. If no result can be computed, NaN is returned.
Description
Function imsl_f_effective_rate computes the continuously-compounded interest rate equivalent to a given periodically-compounded interest rate. The nominal interest rate is the periodically-compounded interest rate as stated on the face of a security.
It can found by solving the following:
Example
In this example, imsl_f_effective_rate computes the effective annual interest rate of the nominal interest rate, 6%, compounded quarterly.
#include <stdio.h>
#include <imsl.h>
int main()
{
float nominal_rate = .06;
int n_periods = 4;
float effective_rate;
effective_rate = imsl_f_effective_rate (nominal_rate, n_periods);
printf ("The effective rate of the nominal rate, 6.0%%, ");
printf ("compounded quarterly is %.2f%%.\n", effective_rate * 100.);
}
Output
The effective rate of the nominal rate, 6.0%, compounded quarterly is 6.14%.
