Nominal annual rate

The rate of interest is usually stated as an annual interest rate, referred to as the nominal rate of interest.

It is equal to the effective periodic rate multiplied by the number of interest periods in a year.

Interest at 4 % means 4 % compounded annually, otherwise the frequency of conversion is indicated, like 4% compounded quarterly.

Notation

The notation jm is used to indicate the nominal annual interest rate j which is compounded m times per year.

Related topics

Effective Rates