Semiannual compounding
Month-based periods include 2-Month, Quarterly, 4-Month, Semiannual, and Annual. These all function in essentially the same way as monthly periods. The Periodic Rate is determined by dividing the Nominal Annual Rate by the number of periods in a year.
The periodic interest rate is used for each period, although actual period lengths vary slightly. For example, a quarter can range in actual length from 89 to 92 days, but the interest rate for a quarter is not affected by this difference if compounding is quarterly. Each quarter is treated as 1/4 of a year.
|
Compound Period |
Period length |
Compounding occurs |
|
2-month |
1/6 of year |
6 times per year |
|
Quarterly |
1/4 of year |
4 times per year |
|
4-month |
1/3 of year |
3 times per year |
|
Semiannual |
1/2 of year |
2 times per year |
|
Annual |
1 year |
1 time per year |