Convert between rate conventions
cashflow_convert_rateConvert annual and monthly interest rates under compound or divide conventions to avoid distorting cash flow calculations.
Instructions
Convert an annual rate to a monthly one and back, under either convention.
'compound' is the discounting convention: (1 + annual)^(1/12) - 1. 'divide' is the loan convention: annual / 12. A 12% annual rate is 0.9489% per month compounded but 1% per month divided, and using one where the other belongs quietly distorts every downstream number.
Args:
value (number): The rate to convert, e.g. 0.14 for 14%.
direction ('annual_to_monthly' | 'monthly_to_annual'): Which way to convert.
convention ('compound' | 'divide'): 'compound' for discounting, 'divide' for amortization.
Returns: input, output, and both conventions side by side so the difference is visible.
Examples:
Use when: "What monthly rate should I discount at for a 14% cost of capital?"
Use when: "Is 1% a month the same as 12% a year?"
Input Schema
| Name | Required | Description | Default |
|---|---|---|---|
| value | Yes | The rate to convert. | |
| direction | No | Which way to convert. | annual_to_monthly |
| convention | No | 'compound' for discounting, 'divide' for amortization. | compound |
Output Schema
| Name | Required | Description | Default |
|---|---|---|---|
| input | Yes | ||
| output | Yes | ||
| divided | Yes | ||
| direction | Yes | ||
| compounded | Yes | ||
| convention | Yes |