Financial Mathematics → Rate of Interest Convertible Fractionally

If we have annual discount rate , then what is the effective annual rate of discount for the period 1/p.

**Example 1.**

If we have rate of discount of 2.7% per annum convertible monthly. What is the effective annual rate of discount?

**Solution**

As we know that the formula for Rate of Interest Convertible Fractionally, is

So, in this case we have rate of discount is 2.7% and the p is 12 (convertible monthly). So, by putting these values in the above formula, we have