<p>The <strong>periodic interest rate</strong> is a key concept in macroeconomics, representing the interest rate applied over a specific time period, typically per year.</p>

<h2>How It Works</h2>
<p>The periodic interest rate is calculated by dividing the annual interest rate by the number of compounding periods in a year. For example, if an annual interest rate is 10% and it's compounded semi-annually, the periodic interest rate would be:</p>
<p><strong>Periodic Interest Rate = Annual Interest Rate / Number of Compounding Periods</strong></p>
<p>In this case, it would be 10% / 2 = 5% per period.</p>

<h2>Why It Matters</h2>
<p>The periodic interest rate is crucial for understanding the true cost of borrowing or the return on investments. It affects the amount of interest earned or paid over time. For instance, a homeowner with a 10% annual interest rate compounded semi-annually would pay 5% interest per period, leading to a higher total interest payment over the loan's life compared to a loan with the same annual rate but quarterly compounding (2.5% per period).</p>