How Do You Calculate Compound Interest Quarterly?
A smart business owner should be knowledgeable of how different types of interest rates are calculated when determining the type of debt funding to use in his business. It is not always a bad idea to accept an interest rate that is compounded over a time period that is shorter than a year. Paying these debts off early actually give the borrower a chance to avoid having interest build up as quickly as it can with a standard annual percentage rate on a loan. Locate the quarterly compounded interest rate that was agreed upon when the debt was originated. This interest rate will be calculated four times a year, once ever 3 months. The new balance after being multiplied by the interest rate will now be used as the starting balance for the next 3-month period. Convert the quarterly interest rate to a decimal value. Complete this task by dividing the accepted quarterly compounded interest rate by 100. Add 1 to the value. This will determine the number you use to multiply your current period’s
