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A loan with a weekly compounded annual interest rate of 15.98% has a periodic interest rate of 0.3073%.
The periodic interest rate is calculated by dividing the yearly interest rate by the number of compounding periods. When there are more compounding periods, interest can be earned on top of or added to more regularly.
What do you mean by Periodic interest rate ?
A periodic interest rate is one that can be applied to a loan or earned on an investment over a given time frame. Although interest rates are frequently compounded more frequently than once a year, lenders normally quote them on an annual basis.
- The annual interest rate divided by the number of times interest accumulates annually gives us the periodic interest rate. In many bank accounts, for instance, interest is compounded either monthly or even daily.
- Your credit card company will calculate your daily interest rate by taking the annual percentage rate (APR), which is an annual rate, and dividing it by 365 (or 360, as some issuers do). For instance, the daily rate would be 0.0438% if your APR was 15.99% (15/365 = 0.000493).
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