How to convert annual to monthly interest rate

[annual-monthly]

How to convert annual rate to monthly rate

Discover how easy it is to convert annual interest to monthly interest:

1. Enter the annual interest amount. 
2. Tap or click the “Calculate” button. 
3. You will have the answer immediately about your monthly interest rate!

Why convert the annual rate to a monthly rate?

For investors and people making payments and only paying the annual interest rate, it's important to know what their monthly interest rate will be. Here are some situations where it's important to convert:

• If you want to make an investment and the interest rate shown is only annual, it is important to know what the monthly return will be. 
• If you have to pay a debt and the finance company only offers the annual interest rate, it's worth converting it to the monthly rate and knowing exactly how much you're paying. 
• If you're taking out a loan and the company only offers the annual rate, it's worth calculating the annual interest rate versus the monthly interest rate. 

This allows you to convert annual interest to monthly interest and know how much you are paying in each period. 

Formula to convert annual rate to monthly rate

There's a simple mathematical formula you can use to convert the annual rate to a monthly rate. Here's how it works:

jm = [(1 + ja)^m/a – 1] x 100

See what the formula means:

    jm = monthly interest rate, the final rate you want to know.

    jm = annual interest rate, which you have.

    m = total period of interest calculation (in this case, 1 month).

    the = period you have the rate (in this case, 1 year, or 12 months). 

Thus, by filling in this formula, it is possible to convert annual interest into monthly interest. 

For your account to work, you must use the same rate in the formulas “a” (year, which should be represented by 12, equivalent to 12 months), and “m” (month, which should be represented by 1, the value of the 12 months you want to know).

How the annual to monthly rate calculation works

Want to see how the annual-to-month rate calculation formula works in practice? Check out our practical example. 

For him, consider an investment with a yield of 12% per year. What will be the monthly yield of this financial transaction?

Check out the result:

jm = [(1 + ja)^m/a – 1] x 100

jm = [(1 + 0.12)^1/12 – 1] x 100

jm = [(1,12)^1/12 – 1] x 100

jm = [1.0095 – 1] x 100

jm = [0.0095] x 100

jm = 0.95%

By solving the formula, we arrived at the result: a monthly rate of 0.95%. Thus, it was possible to convert the annual interest rate to monthly interest. 

But what if you have a monthly interest rate and want to convert it to an annual one? Well, we have a dedicated calculator for that! Click here to make this conversion!

Frequently Asked Questions about Annual Interest Rates

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