You can solve all three fields or use the quick calculator if the number of compounding periods is 12.
If you are having trouble matching another calculators results try changing the interest rate you are using.
Try changing the number of compounding periods. For example 6 times per year.
For example if 5% is not working try the effective or nominal equivalent.
Why is the effective rate
important?
Loans can be calculated with different compounding periods. I.E. Monthly, Quarterly, Semi-Annually, Annually etc.
To protect the consumer in Canada, loan forms must state the effective rate. (Commonly referred to as Annual Interest Rate)
Annual compounding is the effective rate standard because interest rates are commonly expressed as Nominal annual rates. This makes it easy for people to compare rates and select the best rate when borrowing.
There is a formula for finding the Effective Rate... f = ( 1 + i )m - 1
where f is Effective Rate and m = number of compounds per year.
EXAMPLE
Find the effective rate for 18% compounded quarterly
i = .18 / 4 = 0.045
m = 4
f = ( 1 + i )m - 1
f = ( 1.045 )4 - 1
f = 1.192518601 - 1
f = 0.192518601
As a percent, f =
19.25%.