Find the interest rates in the following situations. a. APR = 7%, compounded monthly. Find the effective annual interest rate. b. Nominal rate is 8% compounded quarterly. Find the effective semi-annual rate. c. The effective annual interest rate is 9.15% and compounding is monthly. Find the nominal interest rate. d. r=4% and compounding is monthly. Find the effective quarterly interest rate. a. The effective annual interest rate is%. (Round to one decimal place.)
Find the interest rates in the following situations. a. APR = 7%, compounded monthly. Find the effective annual interest rate. b. Nominal rate is 8% compounded quarterly. Find the effective semi-annual rate. c. The effective annual interest rate is 9.15% and compounding is monthly. Find the nominal interest rate. d. r=4% and compounding is monthly. Find the effective quarterly interest rate. a. The effective annual interest rate is%. (Round to one decimal place.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Find the interest rates in the following situations.
a. APR = 7%, compounded monthly. Find the effective annual interest rate.
b. Nominal rate is 8% compounded quarterly. Find the effective semi-annual rate.
c. The effective annual interest rate is 9.15% and compounding is monthly. Find the nominal interest rate.
d. r=4% and compounding is monthly. Find the effective quarterly interest rate.
a. The effective annual interest rate is%. (Round to one decimal place.)
Expert Solution
Step 1
The funds infused to earn additional income and create wealth is considered as an investment. An investment can earn interest/revenue with various compounding frequencies. The rate that ignores the compounding frequency is recognized as nominal rate and the one that considers the money's time worth is regarded as effective rate.
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