BigDecimal for monthly interest rate

Asked Jul 15 '19 at 13:51

Active Jul 15 '19 at 13:51

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It is often said (e.g. by Josh Bloch in "Effective Java") that we shouldn't use floating-point types, such as double, for financial calculations. How, then, can we calculate a monthly interest rate given an annual rate?

The formula is:

monthly rate = (1 + annual rate)^(1/12) - 1

But BigDecimal doesn't have a pow(BigDecimal) method, nor an nthRoot(int) method. So we can't callrate.pow(1.0/12)norrate.nthroot(12)` because those methods don't exist. If we do this:

monthlyRate = BigDecimal.valueOf(Math.pow(1 + rate.doubleValue(), 1.0/12) - 1)

then it defeats the purpose of using BigDecimal in order to avoid using double.

asked Jul 15 '19 at 13:51

DodgyCodeException

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I thought they had BigDecimal.pow(int n) – Logan Wlv Jul 15 '19 at 13:56
@LoganWlv whilst `1/12` is technically an `int`, I suspect OP really means `1.0 / 12.0`. – Andy Turner Jul 15 '19 at 13:56
@LoganWlv very right, there is this `pow(int n)`, which cannot compute to the power of `1.1`. – deHaar Jul 15 '19 at 13:57
Maybe you'll find here some answers as well: https://stackoverflow.com/q/16441769/582675 – Fabian Barney Jul 15 '19 at 14:03

BigDecimal for monthly interest rate

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