Worked-example setupScope and assumptions
- Both quotes are convertible by simple division and compound monthly for a full year.
- The comparison isolates compounding and excludes every other product term.
- Period
- One year with 12 equal monthly compounding intervals
- Units
- decimal rates; displayed percentages
- Rounding
- Retain full precision and display percentages to four decimal places.
The 4.8% and 6% figures are annualized quotes, not monthly formula inputs and not actual one-year growth.
| Quote | Periodic rate | Effective annual rate |
|---|---|---|
| 4.8% stated, monthly | 0.4% | 4.9070% |
| 6.0% stated, monthly | 0.5% | 6.1678% |
The effective rates follow from twelve applications of the periodic rates. They align the compounding effect, but they do not make the saving and loan scenarios comparable decisions. The cash-flow directions, purposes, risk, fees, contractual terms, and legal disclosures differ.
Verified calculation · time value analysis
The curriculum loader recomputed this example before it entered the site build. Expand any structured input to inspect the stated facts.
- rate conversions
- 2 fields
Inspect data
{
"equipment_fund_quote": {
"compounds_per_year": 12,
"stated_annual_rate": 0.048
},
"loan_quote": {
"compounds_per_year": 12,
"stated_annual_rate": 0.06
}
}Recomputed result
| Measure | Value |
|---|---|
| equipment fund quote effective annual rate | 0.0491 |
| equipment fund quote periodic rate | 0.004 |
| loan quote effective annual rate | 0.0617 |
| loan quote periodic rate | 0.005 |