omparison. Here, M is the number of compounding periods per year and INOM/M is equal to the periodic rate (IPER). If a loan or investment uses compounding, then the nominal interest rate is also its effective annual rate. However, if compounding occurs more than once a year, EAR is higher than v annual INOM. v Hide Feedback Correct Quantitative Problem: Bank 1 lends funds at a nominal rate of 6% with payments to be made semiannually. Bank 2 requires payments to be made quarterly. If Bank 2 would like to charge the same effective annual rate as Bank 1, what nominal interest rate will they charge their customers? Do not round intermediate calculations. Round your answer to three decimal places. X%
omparison. Here, M is the number of compounding periods per year and INOM/M is equal to the periodic rate (IPER). If a loan or investment uses compounding, then the nominal interest rate is also its effective annual rate. However, if compounding occurs more than once a year, EAR is higher than v annual INOM. v Hide Feedback Correct Quantitative Problem: Bank 1 lends funds at a nominal rate of 6% with payments to be made semiannually. Bank 2 requires payments to be made quarterly. If Bank 2 would like to charge the same effective annual rate as Bank 1, what nominal interest rate will they charge their customers? Do not round intermediate calculations. Round your answer to three decimal places. X%
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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![MINDTAP
work
65653 ME
comparison.
annual
Here, M is the number of compounding periods per year and INOM/M is equal to the periodic rate (IPER). If a loan or investment uses
compounding, then the nominal interest rate is also its effective annual rate. However, if compounding occurs more than
once a year, EAR is higher than v
INOM.
Hide Feedback
f6
Correct
5
Quantitative Problem: Bank 1 lends funds at a nominal rate of 6% with payments to be made semiannually. Bank 2 requires payments to be
made quarterly. If Bank 2 would like to charge the same effective annual rate as Bank 1, what nominal interest rate will they charge their
customers? Do not round intermediate calculations. Round your answer to three decimal places.
*%
Hide Feedback
Incorrect
Q Search
De Tran Kev
Check My Work Feedback
Review the definitions for nominal interest rate, effective annual rate, and periodic rate.
Review the effective annual rate of return equation.
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Q Search
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backspace
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4x O
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Transcribed Image Text:MINDTAP
work
65653 ME
comparison.
annual
Here, M is the number of compounding periods per year and INOM/M is equal to the periodic rate (IPER). If a loan or investment uses
compounding, then the nominal interest rate is also its effective annual rate. However, if compounding occurs more than
once a year, EAR is higher than v
INOM.
Hide Feedback
f6
Correct
5
Quantitative Problem: Bank 1 lends funds at a nominal rate of 6% with payments to be made semiannually. Bank 2 requires payments to be
made quarterly. If Bank 2 would like to charge the same effective annual rate as Bank 1, what nominal interest rate will they charge their
customers? Do not round intermediate calculations. Round your answer to three decimal places.
*%
Hide Feedback
Incorrect
Q Search
De Tran Kev
Check My Work Feedback
Review the definitions for nominal interest rate, effective annual rate, and periodic rate.
Review the effective annual rate of return equation.
Y
f7
&
7
JU
U
f8
00
*
4+
8
fg
14
|||
MÒ
hp
9
f10
▶II
99+
O
f11
O
B
f12
L
+
ins
prt sc
}
1
]
W
141
Q Search
delete
Check My Work
backspace
home
4x O
num
lock
7
ho
Expert Solution
Step 1: Determine Given Varinats
Information Provided:
- Bank 1 Rate = 6% compounded semi-annually
- Bank 2 Rate Compounding = Quarterly
Required:
Bank 2 Nominal Rate=?
Step by step
Solved in 4 steps with 2 images
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