Interest Rate Conversion

Abstract

The topic of interest rate conversion is part of the time value concepts covered in introductory finance courses. It is about establishing the equivalence of interest rates over different intra-year periods in compound interest settings. From our experience as instructors of such courses, the task involved is far from being a trivial algebraic exercise, and some students do have difficulties in understanding the underlying concepts. By using Microsoft ExcelTM as a pedagogic tool, this paper is intended to improve the clarity and the effectiveness in the delivery of the materials involved and help students appreciate better some of the corresponding practical nuances.