Bank A offers loans at an 8% nominal rate (its APR) butrequires that interest be paid quarterly; that is, it uses quarterly compounding. Bank Bwants to charge the same effective rate on its loans, but it wants to collect interest ona monthly basis, that is, to use monthly compounding. What nominal rate must BankB set?

Bank A offers loans at an 8% nominal rate (its APR) butrequires that interest be paid quarterly; that is, it uses quarterly compounding. Bank Bwants to charge the same effective rate on its loans, but it wants to collect interest ona monthly basis, that is, to use monthly compounding. What nominal rate must BankB set?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 3STP

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