Module: Xirr::Rates

Defined in:
lib/xirr/rates.rb

Overview

Converting between the ways an interest rate can be quoted. A nominal rate paired with a compounding frequency, the effective annual rate it actually earns, and a continuously-compounded rate all describe the same return in different terms; these move between them.

Class Method Summary collapse

Class Method Details

.continuous_to_periodic(rate, periods) ⇒ Float

Per-period rate equivalent to a continuously-compounded annual rate, for periods periods a year: e^(rate/periods) − 1.

Returns:

  • (Float)

Raises:

  • (ArgumentError) 


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# File 'lib/xirr/rates.rb', line 33

def continuous_to_periodic(rate, periods)
  raise ArgumentError, 'periods must be positive' if periods <= 0

  Math.exp(rate / periods) - 1
end

.effective_annual_rate(nominal, m) ⇒ Float

Effective annual rate earned by a nominal rate compounded m times a year: +(1 + nominal/m)^m − 1+.

Returns:

  • (Float)

Raises:

  • (ArgumentError) 


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# File 'lib/xirr/rates.rb', line 14

def effective_annual_rate(nominal, m)
  raise ArgumentError, 'm must be positive' if m <= 0

  (1 + nominal / m)**m - 1
end

.nominal_rate(effective, m) ⇒ Float

Nominal rate that, compounded m times a year, produces the effective annual rate. The inverse of effective_annual_rate.

Returns:

  • (Float)

Raises:

  • (ArgumentError) 


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# File 'lib/xirr/rates.rb', line 23

def nominal_rate(effective, m)
  raise ArgumentError, 'm must be positive' if m <= 0
  raise ArgumentError, 'effective must be above -100%' if 1 + effective <= 0

  m * ((1 + effective)**(1.0 / m) - 1)
end