Quarterly — Definition, Formula & Examples
Quarterly means once every three months, or four times per year. It divides a year into four equal time periods: January–March, April–June, July–September, and October–December.
Quarterly describes a frequency or rate corresponding to one-fourth of a year, yielding four equally spaced intervals of three months each within a twelve-month cycle.
How It Works
When something happens quarterly, you divide the year into four parts. Each quarter lasts exactly 3 months. If a value is given as an annual amount, you divide by 4 to find the quarterly amount. If a value is given per quarter, you multiply by 4 to find the annual total. In compound interest problems, quarterly compounding means interest is calculated and added four times per year.
Worked Example
Problem: A savings account earns 8% annual interest, compounded quarterly. What interest rate is applied each quarter?
Identify the annual rate: The annual interest rate is 8%, or 0.08 as a decimal.
Divide by 4: Since quarterly means 4 times per year, divide the annual rate by 4.
Answer: The quarterly interest rate is 2% (0.02) per quarter.
Why It Matters
Quarterly calculations appear throughout personal finance, from savings account interest to business earnings reports. Understanding the term helps you correctly interpret loan payments, investment growth, and budgets that use quarterly figures.
Common Mistakes
Mistake: Dividing by 3 instead of 4 because a quarter is 3 months.
Correction: A quarter is 3 months long, but there are 4 quarters in a year. To convert an annual value to quarterly, always divide by 4.