iemisc (version 0.9.9)

EffInt: 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")
)

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)

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"

References

1. SFPE Handbook of Fire Protection Engineering. 3rd Edition, DiNenno, P. J.; Drysdale, D.; Beyler, C. L.; Walton, W. D., Editor(s), 5/93-104 p., 2002. Chapter 7; Section 5; NFPA HFPE-02. See http://fire.nist.gov/bfrlpubs//build02/art155.html.

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