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Compounding frequency

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Definition of Compounding frequency

Compounding Frequency Image 1

Compounding frequency

The number of compounding periods in a year. For example, quarterly
compounding has a compounding frequency of 4.



Related Terms:

Compounding

The process of accumulating the time value of money forward in time. For example, interest
earned in one period earns additional interest during each subsequent time period.


compounding

When an asset generates earnings that are then reinvested and generate their own earnings.


Compounding period

The length of the time period (for example, a quarter in the case of quarterly
compounding) that elapses before interest compounds.


compounding period

the time between each interest computation


Continuous compounding

The process of accumulating the time value of money forward in time on a
continuous, or instantaneous, basis. Interest is earned continuously, and at each instant, the interest that
accrues immediately begins earning interest on itself.



Continuous Compounding

The process of continuously adding interest to a principal plus
interest amount and calculating the resulting compound amount


Discrete compounding

compounding the time value of money for discrete time intervals.


Compounding Frequency Image 2

Discrete Compounding

The process of adding interest to a principal plus interest amount
and calculating the resulting compound amount at specific
intervals, such as monthly or annually


Frequency distribution

The organization of data to show how often certain values or ranges of values occur.


Reset frequency

The frequency with which the floating rate changes.



 

 

 

 

 

 

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