Values used for compounding interest for AFR interest on loans (opens in new tab)

In the US, pursuant to section 1274 of the Internal Revenue Code, certain loans must charge interest rates equal to (or greater than?) the Applicable Federal Rates (AFRs) published periodically by the IRS or else face tax consequences. However, I am receiving conflicting information on how the compounding of this interest works. As an example, let's take a long-term loan made in June 2026 with interest compounded monthly. Per this PDF from the IRS, the AFR when compounding monthly is 4.76%. D...