In the normal interest equation [(1 + i)^n] do we need to find the effective interest rate [1 + (r/m)]^m then directly plug in the found effective interest rate or not into the normal interest equation [(1 + i)^n] (when dealing with a non-annual compounding period). EXPLAIN WHY or WHY NOT (in detail, in an easy to understand format).

In the normal interest equation [(1 + i)^n] do we need to find the effective interest rate [1 + (r/m)]^m then directly plug in the found effective interest rate or not into the normal interest equation [(1 + i)^n] (when dealing with a non-annual compounding period). EXPLAIN WHY or WHY NOT (in detail, in an easy to understand format).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

In the normal interest equation [(1 + i)^n] do we need to find the effective interest rate [1 + (r/m)]^m then directly plug in
the found effective interest rate or not into the normal interest equation [(1 + i)^n] (when dealing with a non-annual
compounding period). EXPLAIN WHY or WHY NOT (in detail, in an easy to understand format).

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