Actual/365 interest rate?

Question

If I have a an annual interest rate of 6,2% which is calculated on an actual/365 basis but payments are made quaterly ... how do I get the quaterly interest rate?

Answer 1

I think the prior responder may have misinterpreted your question. I interpret it as you have an annual interest rate of 6.2% (you are paying or receiving a total of 6.2% interest in a year). Due to compounding your quarterly rate is not 6.2%/4. It is actually {[(1+0.062)^(.25)]-1}*100. In other words, it's the fourth root of 1.062, or 1.51521%. When you think about it 1.0151521 * 1.0151521 * 1.0151521 * 1.0151521 = 1.062

Answer 2

Interest usually charged on day basis.

If outstanding amount is 1,000, interest will be 62 for 365 days @ 6.2%. If it is quarterly it will be (62/365*90)= 15.29. This 90 days will be calculated actual count of days, like if it is first three months of the year it will be 31+28+31=90, next quarter will be 30+31+30=91 etc. You can figure out quarterly rate like 15.29% quarterly.

Answer 3

Interest rates should be determined by the market, not by the government. Interest, which is just another price, is information. It conveys the relative value of savings versus the relative value of current consumption.