Effective interest rate for periodic compounding

Input(s)

$\mathrm{m}$: Number of Compounding Periods Per Year (for example, 12 for Monthly Compounding) (time)

$i_{n}$: Nominal Interest Rate (fraction)

Output(s)

$i_{e}$: Effective Interest Rate (fraction)

Formula(s)

$$ \mathrm{i}_{\mathrm{e}}=\left(1+\frac{\mathrm{i}_{\mathrm{n}}}{\mathrm{m}}\right)^{\mathrm{m}}-1 $$

Reference(s)

Mian, M. A. 2011. Project Economics and Decision Analysis Volume 1: Deterministic Models, Second Edition. Tulsa, Oklahoma: PennWell Corporation. Chapter 2, Page: 43.