How to Calculate Periodic Interest Rate
What is Periodic Interest Rate?
The periodic interest rate is the interest rate applied per compounding period (day, month, quarter). It converts the annual rate to the rate used in payment calculations. Monthly rate = Annual rate / 12.
Step-by-Step Guide
- 1Monthly rate = Annual rate / 12
- 2Daily rate = Annual rate / 365 (or 360 for some loans)
- 3Quarterly rate = Annual rate / 4
- 4EAR = (1 + periodic rate)^periods − 1
Worked Examples
Input
6% annual · monthly compounding
Result
Periodic rate = 6% / 12 = 0.5% per month
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