This workbook has a simple formula to convert compound interest rates.
General Formula = (t*((1+g/f) ^ (f/t))-t)
g = Current interest rate
f = Number of times the current rate compounds per year
t = Number of times the converted new rate compounds per year
This lookup table grabs two of the numbers for the formula
I call the formula above the “General Formula” because of the continuous compounding option:
* Continuous compounding uses an infinite number of periods per year. The general formula above uses 1,000,000 periods to approximate continuous compounding. It is generally accurate out to 5 or more decimal places, but is not accurate enough for use in more sophisticated financial models. Continuous compounding is included in the above model to show there is a limit to compounding. Google “continuous compounding” for more information.
Continuous compounding in Excel is generally calculated as:
The natural log of the annual rate
Solving for the annual rate given the continuous rate
e raised to the power of the continuous rate
On the second sheet of the workbook is a simpler version of the formula that can be copy/pasted into another worksheet without a lookup table:
Download workbook “Convert_Compound“