What is the 'Periodic Interest Rate'
The periodic interest rate is the interest rate charged on a loan or realized on an investment over a specific period of time. Most interest rates are quoted on an annual basis. If the interest on the loan or investment compounds more frequent than annually, the annual interest rate must be converted to a periodic interest rate where interest charged or realized over each compounding period can be calculated. This calculation is made by dividing the annual interest rate by the number of compounding periods.
BREAKING DOWN 'Periodic Interest Rate'
For example, the interest on a mortgage is calculated monthly. If the annual interest rate is 8%, the periodic interest rate used to calculate the interest charge due in any single month would be 0.08 / 12 = .00666 or 0.666%.
Keep in mind that the more frequently an investment compounds, the more quickly the principal grows. For example, let's say two options are available on an investment of $1,000.
Option 1  Invest $1,000 at 8% compounded monthly.
Option 2  Invest $1,000 at 8.125% compounded annually.
At the end of 10 years, Option 1 grows to $2,219.64. Option 2 grows to $2,184.04. Even though the interest rate on Option 2 is higher by 0.125%, the more frequent compounding of Option 1 (caused by the earning of interest on interest) yields a higher end amount.

Effective Annual Interest Rate
Effective Annual Interest Rate is an investment's annual rate ... 
Stated Annual Interest Rate
The return on an investment that is expressed as a peryear percentage, ... 
Interest Rate
The amount charged, expressed as a percentage of principal, by ... 
Anticipated Interest
The amount of interest that a savings vehicle will accrue by ... 
Front Fee
The option premium paid by an investor upon the initial purchase ... 
Back Fee
A payment made to the writer of a compound option in the case ...

Investing
How does Compound Interest Work?
A quick way to understand the impact of compound interest is to ask yourself if youâ€™d rather receive $100,000 a day for a month, or start with a penny on day one and double it every day for those ... 
Economics
Explaining Interest
Interest is the price charged to borrow money, and is typically expressed as a percentage of the principal, or the amount loaned. 
Savings
The Difference Between Compounding Interest and Simple Interest
Interest is the cost a borrower pays to use someone elseâ€™s money. Interest can be either simple or compounded. 
Savings
How Interest Rates Work on Savings Accounts
Here's what you need to know to grow your rainyday fund. 
Personal Finance
Dissecting the Simple Interest Formula
Simple interest ignores the effect of compounding: it's only calculated on the principal amount. This makes it easier to calculate than compound interest. 
Personal Finance
4 Ways Simple Interest Is Used In Real Life
Simple interest works in your favor when you're a borrower, but against you when you're an investor. 
Investing
Simple Interest
Simple interest is a quick method of calculating the interest charged on a loan. Simple interest is determined by multiplying the interest rate by the principal by the number of periods. 
Fundamental Analysis
Calculating Future Value
Future value is the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today. 
Fundamental Analysis
How To Calculate Your Investment Return
How much are your investments actually returning? Find out why the method of calculation matters. 
Economics
Forces Behind Interest Rates
Interest is a cost for one party, and income for another. Regardless of the perspective, interest rates are always changing.

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