nk A offers a 3-year investment that pays an annual effective interest rate of 6%. In addition, a  bonus of 2% of the initial investment is paid at the end of the 3-year period. Bank B offers a 3-year investment without any bonus. Calculate the annual effective interest rate that Bank B would have to offer to produce the same  annual yield as the investment from Bank A

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Amortized Loans

The term "amortization" refers to spreading the value of a loan or a debt over a series of regular payments or installments comprising of both the principal and interest amount. It generally involves the process where in the value of a loan or an intangible asset is written down over its maturity period.