If the nominal annual interest rate is 24% compounded continuously, then the effective interest rate per quarter isOA. (0.24-1)4OB. 3x (0.02-1)OC. (0.24-1)3OD. 0.08 - 1OE. 0.06 - 1

When an interest rate is compounded indefinitely it is called continuous compounding. The formula…

Answered: If the nominal annual interest rate is…

If the nominal annual interest rate is 24% compounded continuously. OA. (0.24-1) 4 OB. 3x (0.02-1) OC. (0.24-1) 3 OD. 0.08-1 O E. 0.06 - 1

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

See similar textbooks

Related questions

Q: Term of Investment Nominal (Annual) Rate (%) Interest Compounded Compounding Periods Rate per Period…

A: Compounding Periods = Term of Investment (in years) * 12 Rate per Period (%) = Nominal (Annual) Rate…

Q: Convert 2.27% compounded monthly to an equivalent interest rate compounded quarterly. Round the…

A: More is the compounding than more is the effective interest rate and less is compounding than less…

Q: Which of the following compounding rates is equivalent to an effective interest rate of 2.75% p.a.…

A: The effective interest rate also referred to as the annual equivalent rate or the effective rate is…

Q: 4. Compute the effective annual interest rate in each of the following situations a. 5.75% nominal…

A: a. Convert 5.75% compounded quarterly to its equivalent interest rate for annual interval. Here, 'R'…

Q: 10. Compute for the missing values in the table. Principal (P) 25,000 70,000 120,000 Time Nominal…

A: Here; i= perodic interest rate n= number of periods m = compounding periods in a year

Q: Using provided data, solve for number of compounding periods. Use the N values when looking up the…

A: Future value refers to the value of all future cash flows compounded at an annual interest rate for…

Q: Which of the following has the most effective annual rate of interest? 12.15% compounded…

A: Effective Annual Rate of Interest: An effective annual interest rate is the true return on a savings…

Q: If A = 2,900,000 pesos, i = 19.91% interest rate compounded semi-annually, n = 20 periods and k = 5…

A: A tool for debt repayment is called an amortization schedule. This schedule provides a breakdown of…

Q: What nominal rate of interest compounded semi-annually can be used instead of 10 % comp. monthly…

A: We need to determine the effective annual rate that would equal the 2 compounding methods. The…

Q: $11,000 is borrowed for 150 days at an 8% interest rate. Calculate the maturity value by the exact…

A: When the borrower borrows a loan from the lender, he has to pay a rate of interest on the borrowed…

Q: Given i(26) = 6.375 %, find the equivalent nominal interest rate compounded monthly. Question…

A: Given information, Nominal interest rate compounded bi-weekly (i) = 6.375% or 0.06375Compounding…

Q: Complete the following using present value.

A: Time value of money (TVM) means the amount of money received in the present period will have more…

Q: ics 3 parts (6-8) Calculate the yearly effective interest rate if an investment is paid 2% interest…

A: Effective interest rate is the rate of interest earned by the investor yearly. If the investor…

Q: Security A and security B both provide semi anual payment of 89 over 5Year. the annual rate of…

A: There are two types of annuity Deferred annuity Annuity due Deferred annuity means cash flow…

Q: Using Table 11-1, calculate the compound amount and compound interest (in $) for the investment.…

A: In finance, the concept of time value states that money today has more purchasing power than the…

Q: . Estimate the duration of Deposit NBank Balance SheetCash = $ 50Loan M (7%, 6 years) = $200Deposit…

A: Given Information:Loan M (7%, 6 years) is $200 Deposit N (3 years, 2%) is $200 Equity is $50 Total…

Q: An amortized loan is made at a nominal interest rate i) = 6%. The loan is paid off in 30 level…

A: Given: Interest ate compounded semi-annually = 6% Number of total payments = 30 Payments per period…

Q: Question A Suppose the annualized LIBOR3 is 4.23% and the annualized LIBOR6 is 5.97%. What is the…

A: As per the given information:The forward rate for a LIBOR3 (annualized) deposit is to be placed…

Q: Parts aâ€“c for each of the following cases. Answer parts aâ€“c for each of the following cases.…

A: Future value (FV) is the value of a current asset at a future date based on an assumed rate of…

Q: each month for 2n mc Lrengid Find n

A: Monthly interest rate is 24% =0.24= 0.2 Time period of the loan =2n months Need to calculate n…

Q: Annual interest rate Investment period (Years) Compounding periods Payment per compounding period…

A: Present value of a stream of cash flow is calculated by using the annuity formula. Data given:…

Q: If the effective annual interest rate is 10%, what is the nominal annual rate if compounding is bi-…

A: Interest rate refers to the percentage at which a borrower pays the interest amount on the loan…

Q: Which of the following compounding rates is equivalent to an effective interest rate of 2.75% p.a.?

A: When the compounding frequency per year is not 1 then in that case the stated interest rate will not…

Q: The nominal interest rate compounded quarterly, ; (4) is 6%. Let i be the annual effective interest…

A: The cost of borrowing money or the return on investment represented as a percentage of the principal…

Q: Find the effective rate of annual interest 9% that paid quaterly. a. 9.5% b. 9.3% c. 9.10% d. 9.0%

A: Given Details: Normal Interest Rate= 9% Compounding = Quarterly

Q: 7. .For each situation, determine i).the amount ii) the interest earned a) $ 15000 borrowed for 6…

A: Time value of money is one of useful technique used in finance. This says that amount invested today…

Q: Sam Long anticipates he will need approximately $226,800 in 15 years to cover his 3-year-old…

A: Present value refers to the current worth of the amount for the future expected cash flows at given…

Q: 1. The semiannual interest rate equivalent to an effective monthly rate of 0.90% is equal to_ 2.…

A: In this problem we have to calculate effective interest rate and nominal interest rate.

Q: Compare the stated annual rate (r) to the effective annual rate (EAR). What relationship exists…

A: The effective annual rate of interest is the real return on the savings account when the effects of…

Q: (15) 00 (11) quarterly (12) (13) 6. (14) 8,8 Semi- D00 11% (16) (17) (18) (19) 10,000 (2 annually…

A: More is the compounding more is the effective interest rate and hence future value increases with…

Q: Find the effective annual interest rate of 4% compounded quarterly. a. 4.31% b. 4.25% C. 4.75% d.…

A: In the given question we require to compute the effective annual interest rate of 4% compounded…

Q: he present value of $5,000 payable in 150 days at 8.5% per annum simple interest is: Select one: a.…

A: Present Value under Simple Interest = Future Value /[ 1 + {Interest rate * n}]

Q: If the effective annual interest rate is 9.58% and the nominal annual rate is 9.25%, compounding is:…

A: The effective annual rate (or the EAR) takes into consideration the impact of compounding. On the…

Q: The effective annual interest rate, jl, equivalent to j26 = 17.80% p.a. is: O 1) 19.418 02) 8.90% 3)…

A: The effective annual interest rate is a crucial concept in finance that is used to describe the true…

Q: What rate of interest compounded annually is the same as the rate of interest of 6% compounded…

A: Concept . A = P (1+R)n Where A = amount avaliable after compound interest. P = principal amount. R…

Concept explainers

Effective Interest Rate

The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.

Question

If the nominal annual interest rate is 24% compounded continuously, then the effective interest rate per quarter is
OA. (0.24-1)
4
OB. 3x (0.02-1)
OC. (0.24-1)
3
OD. 0.08 - 1
OE. 0.06 - 1

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Q2: a) What rate, compounded semi-annually, is equivalent to 10% compounded quarterly? m NOM EFF m EFF EQUIV A. 10.13% B. 10.38% C. 10.25% D. 10.85%
Convert 4.86% compounded semi-annually to an equivalent interest rate compounded quarterly. Round EFF to four decimal places, round NOM (2) to two decimal places. NOM (1) = % C/Y (1) = EFF = % (4 decimal places) NOM (2) = % C/Y (2) =
Complete the following using present value. (Use the Table 12.3.) (Do not round intermediate calculations. Round the "PV factor" to 4 decimal places and final answer to the nearest cent.) On PV Table 12.3 PV of amount desired at Amount Period Length of time desired at Rate Compounded Rate used PV factor used end of period used end of period 18,500 5 years 8 % Quarterly %6 ( Prev 7 of 18 Next > %24
!
Present value interest factor of $1 per period at i% for n periods, PVIF(i,n). 9.5% 10.0% Period 0.5% 1.0% 1 0.8340 2 3 0.7462 0.7252 0.7050 0.6853 0.6663 0.6480 0.6302 0.6129 9 10 11 12 13 14 18 0.4746 1.5% 20% 2.5% 3.0 % 3.5 % 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0 % 7.5 % 8.0% 8.5% 9.0 % 0.9950 0.9901 0.9852 0.9804 0.9756 0.9709 0.9662 0.9615 0.9569 0.9524 0.9479 0.9434 0.9390 0.9346 0.9302 0.9259 0.9217 0.9174 0.9132 0.9091 0.9901 0.9803 0.9707 0.9612 0.9518 0.9426 0.9335 0.9246 0.9157 0.9070 0.8985 0.8900 0.8817 0.8734 0.8653 0.8573 0.8495 0.8417 0.9851 0.9706 0.9563 0.9423 0.9286 0.9151 0.9019 0.8890 0.8264 0.8763 0.8638 0.8516 0.8396 0.8278 0.8163 0.8050 0.7938 0.9802 0.9610 0.9422 0.9238 0.9060 0.8885 0.8714 0.8548 0.8386 0.7829 0.7722 0.7617 0.7513 08227 0.8072 0.7921 0.7773 0.7629 0.7488 0.7350 0.7216 0.7084 0.9754 0.9515 0.9283 0.9057 0.8839 0.8626 0.8420 0.8219 0.8025 0.6956 0.6830 0.7835 0.7651 0.7473 0.7299 0.7130 0.6966 0.6806 0.9705 0.9420 0.9145 0.8880 0.8623 0.8375 0.8135…
Using Table 11-1, compute the amount of compound interest (in $) earned in 1 year and the annual percentage yield (APY) for the investment. (Round your answers to two decimal places.) Principal NominalRate (%) InterestCompounded Compound InterestEarned in 1 Year Annual PercentageYield (APY) $3,000 14 semiannually $ %
B. Complete the table by computing for the maturity values, compound interests and present values. Present Nominal Interest Time Total Compound Maturity value Interest Value Rate i(m) compounded rate in number of Interest per Years conversions period 20,000 6% Semi- (6) 8 (7) (8) (9) annually (10) 10% quarterly 2.5% 6 (12) 100,000
Which one of the following represents the highest effective interest rate per year? Select one: O a 10.5% per year, compounded semiannually O b. 10.4% per year, compounded daily Oc 10% per year, compounded quarterly Od. 10% per year, compounded monthly O e. 9.8% per year, compounded continuously
3-75. Compute the effective annual interest rate in each of these'situations: (3.16) $1,500 $1,400 $1,300 $1,200 $1,100 $1,000 1 2. 3 6 7 8 EOY i = 30%/yr. is equivalent to
5. The compound interest on Rs. 30,000 at 7% per annum is Rs. 4347. The period (in years) is: A. Ο 2 В. О 1 С. О З D. O 4 IN 2.
Which one of the following represents the highest effective interest rate per year? Select one: O a. 10.5% per year, compounded semiannually Ob. 10.4% per year, compounded daily O c. 10% per year, compounded quarterly O d. 10% per year, compounded monthly O e. 9.8% per year, compounded continuously
A debt of P3,500 is to be amortized by 6 equal semiannual payments with interest at 6%compounded semiannually, What is the balance of the principal on the 4th payment?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS