Basics Of Engineering Economy
Basics Of Engineering Economy
2nd Edition
ISBN: 9780073376356
Author: Leland Blank, Anthony Tarquin
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 3, Problem 1P
To determine

Calculate the nominal interest rate.

Expert Solution & Answer
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Explanation of Solution

Option (a):

Time period is denoted by n and the interest rate is denoted by i. Nominal interest for semiannual can be calculated as follows.

Nominal interst rate=iPer quarter×QuarterIn semiannual=0.02×2=0.04

Nominal interest for semiannual is 4%.

Option (b):

Nominal interest for annual can be calculated as follows.

Nominal interst rate=iPer quarter×QuarterIn year=0.02×4=0.08

Nominal interest for annual is 8%.

Option (c):

Nominal interest for 2 years can be calculated as follows.

Nominal interst rate=iPer quarter×QuarterIn 2 year=0.02×8=0.16

Nominal interest for 2 year is 16%.

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Basics Of Engineering Economy

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