If you were a borrower, would you prefer a higher or lower compounding frequency for a...
If you were a borrower, would you prefer a higher or lower compounding frequency for a given nominal (stated) interest rate?
Homework Answers
As a borrower, I would like to keep the compounding frequesncy as low as possible because higher the frequency, higher will be the Maturity Value at the end and vice versa.
Compounding basically means how frequently the interest is added and then interest is calculated on that interest as well until the next period and so on. As a borrower, the continous compounding is the most expensive compounding and annual comppounding the cheapest compounding.
So, as a borrower, I want to pay as low compound interest as possible.
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