What Is the Periodic Interest Rate?
The periodic interest rate is the interest charged or earned during a single compounding period — a month, a quarter, a day, or any other interval. While lenders and banks usually quote an annual rate, most loan and savings formulas (like loan amortization or compound interest) require the rate per period. This calculator converts an annual rate into its periodic equivalent.
How to Use It
Enter the annual interest rate as a percentage, then enter how many compounding periods occur each year: 12 for monthly, 4 for quarterly, 2 for semi-annual, 52 for weekly, or 365 for daily. The calculator divides the annual rate by the number of periods to give the rate applied each period.
The Formula Explained
The formula is simply $$i = \frac{r}{n}$$ where r is the annual (nominal) interest rate, n is the number of periods per year, and i is the periodic rate. This is the nominal conversion used in standard finance formulas; it does not compound the periods together (that would be the effective rate).
Worked Example
Suppose a loan has an annual interest rate of 12% compounded monthly. With \(n = 12\) periods, the periodic (monthly) rate is $$12\% \div 12 = 1\% \text{ per month}$$ For a credit card at 18.25% APR billed daily over 365 days, the daily periodic rate is $$18.25 \div 365 = 0.05\% \text{ per day}$$
FAQ
Is the periodic rate the same as APR? No. APR is the annual nominal rate; the periodic rate is that rate broken into one period.
Does this account for compounding? No — this is the simple nominal division. The effective annual rate, which includes intra-year compounding, is higher than the nominal rate when \(n > 1\).
What number of periods should I use? Match it to how interest is applied: monthly = 12, quarterly = 4, daily = 365, weekly = 52.
