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Definition of Annual effective interest rate - Finance dictionary
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Annual effective interest rate (See Chapter 17 of the Vernimmen)
When interest is paid more frequently than once a year, the annual effective Interest rate is used to evaluate the real Cost of the resource on an annual basis. To pass from the nominal Interest rate to the annual effective Interest rate, the following formula is used: (1 + t) = (1 + ka/n)n, where t is the annual effective Interest rate, n is the number of interest payments in the year and ka/n the Proportional rate during one period, or t = (1 + ka/n)n – 1.
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Definitions of terms begining
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Abandonment risk
Abeyance
Accelerated book-building
Accelerated depreciation
Accelerated share repurchase
Acceleration, Acceleration clause
Account balancing
Account receivable aging
Accountant letter
Accounting criteria of value creation
Accounting currency risk
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Accredited investors
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Acid test ratio
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Act of God
Acting in concert
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Adjustable rate preference shares
Adjustable-rate debt security
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Adjusted present value, APV
Administrative synergy
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Advance dividend
Advance rate
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African Development Bank (ADB)
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Agency costs
Agency theory
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Agent fee
Aging, Ageing, aging balance, ageing balance
Agreement in principle
AIM
All-in cost
All-share transaction
Alliance
Allocative efficiency
Allotment
ALM
Alpha
Alternative assets
Alternative Investment Market
Alternative management
American Depositary Receipt
American option
Amortisation
Amortisation of the loan
ANAV
Angel investors or Business angels
Annual effective interest rate
Annual meeting
Annual Premium Equivalent
Annualise or annualised
Annuity
Annuity factor
Antidilution
Antitrust laws
APE
Apparent dilution
Appraisal clause
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Appraisal or Valuation
APR or Annual Percentage Rate
APT
APV
Arbitrage
Arbitrage pricing theory, APT
Arbitration, Arbitrators
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Arranging the deal
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Associated undertaking
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Asymmetry - option
Asymmetry - shareholder / creditor
At par, Above par, Below par
At the money
Atypical silent partner
Auction
Auction clause
Audit trail
Average collection
Average life
Average life of a bond
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Annual effective interest rate (See Chapter 17 of the Vernimmen)
When interest is paid more frequently than once a year, the annual effective Interest rate is used to evaluate the real Cost of the resource on an annual basis. To pass from the nominal Interest rate to the annual effective Interest rate, the following formula is used: (1 + t) = (1 + ka/n)n, where t is the annual effective Interest rate, n is the number of interest payments in the year and ka/n the Proportional rate during one period, or t = (1 + ka/n)n – 1.
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