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Compounding Basis

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r2=[(1+r1n1)n1n2-1]n2
n1Base frequency
n2Final Frequency
r1Base interest

This formula is used to convert an interest rate from one compounding basis to another compounding basis.  The inputs are:

  1. r1 which is the base interest rate
  2. n1 is the base compounding frequency (e.g. 1 for year)
  3. n2 is the final compounding frequency (e.g. 12 for monthly)