EffInt: Effective Interest rate (Engineering Economics)

In iemisc: Irucka Embry's Miscellaneous Functions

Effective Interest rate (Engineering Economics)

Description

Computes the effective interest rate given the nominal interest rate per period

Usage

EffInt(
  r,
  frequency = c("annual", "semiannual", "quarter", "bimonth", "month", "daily")
)

Arguments

r	numeric vector that contains the nominal interest rate(s) per period as a percent
frequency	character vector that contains the frequency used to obtain the number of periods [annual (1), semiannual (2), quarter (4), bimonth (6), month (12), daily (365)]

Details

i is expressed as

i = \left(1 + \frac{r}{n}\right)^n - 1

i

the "effective interest rate per interest period"

r

the "nominal interest rate"

n

the "number of compounding periods per year"

Value

EffInt numeric vector that contains the effective interest rate rounded to 2 decimal places (this is the i used in the other Engineering Economics functions)

Author(s)

Irucka Embry

References

1. SFPE Handbook of Fire Protection Engineering. 3rd Edition, DiNenno, P. J.; Drysdale, D.; Beyler, C. L.; Walton, W. D., Editor(s), page 5-95, 2002. Chapter 7; Section 5; NFPA HFPE-02. See https://web.archive.org/web/20180127185316/http://fire.nist.gov/bfrlpubs/build02/PDF/b02155.pdf.

2. William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling, Engineering Economy, Fourteenth Edition, Upper Saddle River, New Jersey: Pearson/Prentice Hall, 2009, pages 164-165.

Examples

library(iemisc)

# Example 4-28 from Sullivan Reference text (page 165)
EffInt(1.375, frequency = "month")
# the nominal interest rate per period (month) is 1.375\%


# Example from SFPE Reference text
EffInt(18 / 12, frequency = "month")
# the nominal interest rate is 18\% per year or 18\% / 12 months

iemisc documentation built on Sept. 25, 2023, 5:09 p.m.