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Worked-example setupScope and assumptions
- The 4.8 percent quote is a stated annual rate convertible by simple division into 12 equal monthly intervals.
- The valuation date and target date are exactly 36 monthly intervals apart.
- Period
- 2026-01-01 through the month-36 target date
- Units
- decimal rate per month and whole monthly intervals
- Rounding
- Retain full precision; display rates as percentages to four decimal places.
Cedar Works supplies a 4.8% stated annual rate, monthly compounding, and a three-year horizon. Do not enter those story values directly into a TVM formula.
1. Convert the percentage and rate interval
4.8% = 0.048
monthly periodic rate = 0.048 / 12 = 0.004 per month
2. Convert the horizon to the same interval
3 years × 12 months per year = 36 monthly periods
The controlled pair is therefore (i = 0.004/month, n = 36 months). The units
match. Pairing 0.048 with 36 or 0.004 with 3 would not.
3. Cross-check one-year effective growth
(1.004)^12 - 1 = 0.0490702075… = 4.9070…%
This cross-check describes compounding under the supplied quote. It does not establish that the rate is available, guaranteed, or appropriate for an accounting measurement or finance decision.
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
- 1 field
Inspect data
{
"equipment_fund_quote": {
"compounds_per_year": 12,
"stated_annual_rate": 0.048
}
}Recomputed result
| Measure | Value |
|---|---|
| effective annual rate | 0.0491 |
| periodic rate | 0.004 |