Annuity Frequency Different Than Compounding Frequency

calendar_today November 1, 2025 article 50 words access_time 1 min replay Modified November 1, 2025

Table of Contents

Concept

We are dealing with annuities that compound interest at a different time interval than the fund’s nominal interest rate

Convert the nominal interest rate to the same time interval as the annuity; use that interest for all calculations

$$\left(1 + \frac{i^{(m)}}{m}\right)^{mt} = \left(1 + \frac{i^{(m^*)}}{m^*}\right)^{mt} $$

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