Rounding Error

Rounding Error

A mathematical miscalculation caused by altering a number to an integer or one with fewer decimals. The significance of rounding error depends on the circumstances. While it is inconsequential enough to be ignored in most cases, rounding error can have a cumulative effect in the present-day computerized financial environment, in which case it may need to be rectified.

The term "rounding error" is also used sometimes to indicate an amount that is not material to a very large company.

Financial statements of many companies routinely carry the warning that "numbers may not add up due to rounding." In such cases, the apparent error is only caused by the financial spreadsheet's quirks, and would not need rectification.

For example, consider a situation where a financial institution mistakenly rounds off interest rates on mortgage loans in a given month, resulting in its customers being charged interest rates of 4% and 5% instead of 3.60% and 4.70% respectively. In this case, the rounding error could affect tens of thousands of its customers, and the magnitude of the error would result in the institution incurring hundreds of thousands of dollars in expenses to correct the transactions and rectify the error.

Investment dictionary. . 2012.

Look at other dictionaries:

• rounding error — noun (mathematics) a miscalculation that results from rounding off numbers to a convenient number of decimals the error in the calculation was attributable to rounding taxes are rounded off to the nearest dollar but the rounding error is… …   Useful english dictionary

• rounding error — apvalinimo paklaida statusas T sritis Standartizacija ir metrologija apibrėžtis Paklaida, atsirandanti apvalinant skaičiavimų rezultatus. atitikmenys: angl. error of roundness; rounding error; round off error vok. Rundungsfehler, m rus.… …   Penkiakalbis aiškinamasis metrologijos terminų žodynas

• rounding error — apvalinimo paklaida statusas T sritis fizika atitikmenys: angl. error of roundness; rounding error; round off error vok. Abrundungsfehler, m; Rundungsabweichung, f; Rundungsfehler, m rus. погрешность округления, f pranc. erreur d’arrondi, f …   Fizikos terminų žodynas

• rounding error — error made in estimating a number …   English contemporary dictionary

• rounding — noun (mathematics) a miscalculation that results from rounding off numbers to a convenient number of decimals the error in the calculation was attributable to rounding taxes are rounded off to the nearest dollar but the rounding error is… …   Useful english dictionary

• error — noun ADJECTIVE ▪ egregious (esp. AmE), fundamental, glaring, grave, great, grievous, major, serious ▪ The report contained some glaring errors …   Collocations dictionary

• rounding — /rown ding/, adj. 1. round or nearly round. 2. of, pertaining to, or used for making something round. 3. turning, curving, or circling around. 4. pertaining to the mathematical process of rounding: a rounding error. n. 5. the act or process of… …   Universalium

• error of roundness — apvalinimo paklaida statusas T sritis Standartizacija ir metrologija apibrėžtis Paklaida, atsirandanti apvalinant skaičiavimų rezultatus. atitikmenys: angl. error of roundness; rounding error; round off error vok. Rundungsfehler, m rus.… …   Penkiakalbis aiškinamasis metrologijos terminų žodynas

• error of roundness — apvalinimo paklaida statusas T sritis fizika atitikmenys: angl. error of roundness; rounding error; round off error vok. Abrundungsfehler, m; Rundungsabweichung, f; Rundungsfehler, m rus. погрешность округления, f pranc. erreur d’arrondi, f …   Fizikos terminų žodynas

• Rounding — This article is about numerical rounding. For lip rounding in phonetics, see Labialisation. For other uses, see Rounding (disambiguation). Rounding a numerical value means replacing it by another value that is approximately equal but has a… …   Wikipedia