Answered: What is the effective annual interest…

What is the effective annual interest rate on this investment assuming that interest is compounded (a) annually? (b) semiannually? (c) quarterly? (d) monthly? (e) daily (365 days)? (f) Weekly?

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 8MC: Define the stated (quoted) or nominal rate INOM as well as the periodic rate IPER. Will the future...

See similar textbooks

Related questions

Q: Use graphical approximation techniques to answer the question. When would an ordinary annuity…

A: Future value:The term "future value" refers to the expected value of an investment at a future…

Q: At what annual interest rate, compounded annually, would $500 have to be invested for it to grow…

A: FV = A * (1+r)nwhereFV = future valueA = amount investedr = interest raten = time period

Q: This problem demonstrates the dependence of an annuity's future value on the size of the periodic…

Q: 4. If P3,200 is invested for 1 year at 9% compounded monthly, what is the compound interest on the…

A: In this question, we are required to compute the compound interest. Compound interest: Compound…

Q: Consider two perpetuities (X and Y) at interest rate i. X provides level payments of $105 at the end…

A: Given, Perpetuity X - Level payment of $105 at the end of each year . PV of $105 received at the…

Q: An investment will pay you $4,611.9 in 3 years if you pay $1,376.68 today. What is the implied rate…

A: Rate of return = (Future value / Present value)^(1/Time) - 1 where, Future value = $4,611.9 Present…

Q: Suppose a borrower makes a $100,000 loan with annual payments at a 10 percent rate and a 10-year…

A: Annuity: An annuity is the series of payments which is received or paid for a fixed period of…

Q: What would be the future value of $7,992 invested annually for nine years beginning one year from…

A: future value formula: future value =A×1+rn-1r where, A=annuity r=rate of interest n=number of years

Q: earns an annual interest rate of 12 percent compounded Semi annually. What is the effective annual…

A: The given problem can be solved using EFFECT function in excel. EFFECT function computes effective…

Q: uppose that one has a bank loan for P15,584.48, which is to be repaid in equal end-of-month…

A: In this we need to calculate present value factor and from that you will get monthly payment.

Q: If the interest rate per day is 0.014%, then what is the annual rate?

A: Interest rate:An interest rate is a percentage on the principal amount at which a lender gives money…

Q: makes deposit to a shor Inve n 1% !), what will the account balance be af

A: Simple Interest = Principal (initial deposit) * Interest Rate * TimeWhere:Principal = initial…

Q: Find the present values of these annuities due. a. What is the present value of $4,000 per month…

A: PMT=$4000 per monthNumber of payments=n=12Interest rate=4.8%Monthly interest rate=r=4.8/12=0.4%Find…

Q: The annual interest rate is 12%. Find (a) the semi-annual rate, (b) the quarterly rate, (c) the…

A: semi-annual rate is the rate that is compounded twice a year (i,e) for every six months is called…

Q: For an effective interest rate of 16% per annum, what is the equivalent nominal annual rate…

A: The periodic interest rate is multiplied by the number of periods in a year to create the nominal…

Q: 3. a) Calculate the interest rate applied in a loan of P1000 with repayment of P1100 and duration of…

A: Interest rate is the percentage of interest which is charged on the amount used by the other for a…

Q: What is the corresponding effective interest rate of 18% compounded semi-annually?

A: The effective interest rate is the real return earned on an interest-paying investment or savings…

Q: The effective rate of interest compounded quarterly is given by i(m)/m. What is m? Write your answer…

A: Quarterly compounded effective rate of interest implies that rate of interest is compounded every…

Q: . An investor buys a 150 TL investment fund from the bank and sells it for 165 TL after 25 days.…

A: Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only one…

Q: a hypothetical financial instrument pays 10% annual interest permanently. It pays interest at the…

A: Here, Annual interest rate = 10% YTM = 12% monthly To Find: Part a. Macaulay duration =? Part b.…

Q: e annual in

A: Given information : Effective annual interest rate = 8% Compounding period = 26 weeks

Q: You make an investment into a money market account at time T=0. In year T=5, the value of the money…

A: Given: Time period: 5 years Future value: $5000 Rate of interest: 5% compounded quarterly To…

Q: Suppose Snli 40 and (1 + i)n = 3.7, where i is an effective annual interest rate. What is the…

A: 1. Calculate the interest rate: 2. Calculate the value of v (the present value factor): 3. Calculate…

Q: What is the future value (at the end of 8 years) of an annuity that pays $700 a quarter over 8 years…

A: Future value is an estimate of future cash values that may be received at a future date,…

Q: You are offered an investment with a quoted annual interest rate of 6% with quarterly compounding of…

A: Interest rate (r) = 6% Number of compounding per year (m) = 4Tutor Dashboard - Course Hero

Q: he discount factor corresponding to a 3-year continuously compounded interest rate is 0.765667. What…

A: The effective rate is the after considering the impact of compounding and always more than actual…

Q: a) What is the present value of an ordinary annuity of $405 per month for 4 years at 6% interest…

A: Present value is the estimation of the current value of future cash value which is likely to be…

Q: If the compounding frequency is monthly and the discount factor=0.62026, what is the value of the…

A: Let i(12) denote monthly interest rate Discount Factor = 1/(1+i(12)) 0.62026 = 1/(1+i(12)) i(12) =…

Question

Suppose that an investment promises to pay a nominal 9.6 percent annual rate of
interest. What is the effective annual interest rate on this investment assuming that
interest is compounded (a) annually? (b) semiannually? (c) quarterly? (d) monthly? (e)
daily (365 days)? (f) Weekly?

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

An investment pays you 9% interest, compounded quarterly. What is the periodic rate of interest? What is the nominal rate of interest? What is the effective rate of interest?
ou can assume that all payments are made at the beginning of the period and use "1" for the "type" argument in the formula. A. Suppose you invest $ 11,400 today. What is the future value of the investment in 29 years, if interest at 7% is compounded annually? B B. Suppose you invest $ 11,400 today. What is the future value of the investment in 29 years, if interest at 7% is compounded quarterly? 4 5 6 27 28 29 C. Suppose you invest St $ 570 monthly. What is the future value of the investment in 29 years, if interest at 5% is compounded monthly? Question 1 Question 2 + Ready Accessibility: Investigate MAR 17 A W +
a. For an interest rate of 18% per year compounded continuously, calculatethe effective monthly and annual interest rates.b. An investor requires an effective return of at least 15%. What is the minimum annual nominal rate that is acceptable for continuous compounding?
An investment becomes P 4,500,000 four years from now and becomes P 5,250,000 thirteen years from now. a. Assuming rate of compounded interest remains constant through time, what was the investment's value on the present time? b. What rate of interest compounded quarterly is equivalent to the interest rate of the given investment? c. What rate of interest compounded monthly is equivalent to the interest rate of the given investment?
If you invest $10,228.50 into an account earning an annual nominal interest rate of 7.892%, how much will you have in your account after 11 years if the interest is compounded quarterly? If the interest is compounded continuously? If interest is compounded quarterly: FV If interest is compounded continuously: FV What is the Effective Annual Yield in percent when the annual nominal interest rate is 7.892% compounded quarterly? EAY (Note: All answers for FV should include a dollar sign and be accurate to two decimal places)
If the compounding frequency is monthly and the discount factor=0.62026, what is the value of the corresponding annual interest rate? What is the corresponding continuous compounding annual interest rate if the discount factor remains at 0.62026?
Suppose that a savings account pays an effective rate of interest of 11.7 percent. What is the equivalent annual compound interest rate if interest is compounded semi-annually? Answer = %?
Estimate the annual percent rate for the add on loan Using the given number of payments and annual interest-rate. Use the formula APR = 2nr/n+1 N= 48; R= 8% APR=???
An investment will pay you $4,611.9 in 3 years if you pay $1,376.68 today. What is the implied rate of return? (Convert to a percent. Round to 2 decimal places.)
If an investment increases from P40,000 to P50,612 in 3 years, what is the nominal rate of interest converted semiannually? (rate semiannual)
Which of the following end-of-period payments will provide the smallest future value to an investor over a specified term at the same (positive) interest rate and compounding frequency? O $200 payments monthly O $600 payments quarterly O $1200 payments semi-annually $2400 payments annually All of the above will result in the same future value
Define the stated (quoted) or nominal rate INOM as well as the periodic rate IPER. Will the future value be larger or smaller if we compound an initial amount more often than annually—for example, every 6 months, or semiannually—holding the stated interest rate constant? Why? What is the future value of $100 after 5 years under 12% annual compounding? Semiannual compounding? Quarterly compounding? Monthly compounding? Daily compounding? What is the effective annual rate (EAR or EFF%)? What is the EFF% for a nominal rate of 12%, compounded semiannually? Compounded quarterly? Compounded monthly? Compounded daily?