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