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R/P = I
R = Annual interest rate
P = Number of periods
I = Periodic rate
The periodic rate is used to calculate interest rate that has been charged on a loan over a specific period of time.
It is simply calculated by dividing the annual interest with the number of periods.
This rate can then be used to calculate monthly compounding interest on a loan, as well as daily.
For example, if the annual rate is 6% with a monthly period, the monthly periodic rate would be
0.06/12 = 0.005 or 0.5%
We can then use this to calculate the compounding interest
On a $100,000 compounding interest for 7 months would be
(1 + 0.005)7 = 1.0355
Then, 1.0355 x $100,000 = $103,550
The dollar amount after 7 months would be $103,550.