Just need help with part (2).
What is the formula for finding the EAR? Thank you.
Homework Answers
If an 8% annual rate is compounded annually then the EAR is equal to 8%.
Effective rate means the quoted % per period and the compounding frequency are the same. Following are examples of effective rates.
10% per year compounded annually (Effective annual rate)
2% per month compounded monthly (Effective monthly rate)
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Just need help with part (2).
What is the formula for finding the EAR? Thank you....
Changing compounding frequency Using annual, semiannual, and quarterly compounding periods, (1) calculate the future value if...
Changing compounding frequency Using annual, semiannual, and quarterly compounding periods, (1) calculate the future value if $4,000 is deposited initially at 1 1% annual interest for 6 years, and (2) determine the effective annual rate (EAR) (1) The future value, FVn is (Round to the nearest cent) (2 If the 11% annual nominal rate is compounded annually, the EAR is 96 Round to two decimal places. (1) The future value, FVn, is S(Round to the nearest cent.) (2) If the...
Changing compounding frequency Using annual, semiannual, and quarterly compounding periods, (1) calculate the future value if...
Changing compounding frequency Using annual, semiannual, and quarterly compounding periods, (1) calculate the future value if $6,000 is deposited initially at 11% annual interest for 7 years, and (2) determine the effective annual rate (EAR) Annual Compounding (1) The future value, Vn, is (Round to the nearest cent.) 2) If the 11% annual nominal rate is compounded annually the EAR is 96 Round to two decimal places Semiannual Compounding (1) The future value, Vn, is (Round to the nearest cent.)...
P5-38 Changing compounding frequency Using annual, semiannual, and quarterly com- pounding periods for each of the...
P5-38 Changing compounding frequency Using annual, semiannual, and quarterly com- pounding periods for each of the following, (1) calculate the future value if $5,000 is deposited initially, and (2) determine the effective annual rate (EAR). a. At 12% annual interest for 5 years. b. At 16% annual interest for 6 years. c. At 20% annual interest for 10 years.
I can't make excel figure out the continuous interest. (#4) You plan to invest $2,100 in...
I can't make excel figure out the continuous interest. (#4)
You plan to invest $2,100 in an individual retirement arrangement (IRA) today at a nominal Compounding frequency and time value Personal Finance Problem annual rate of 8%, which is expected to apply to all future years. a. How much will you have in the account at the end of 9 years if interest is compounded (1) annually, (2) semiannually, (3) daily (assume a 365-day year), and (4) continuously? b. What...
Future Value of an Annuity for Various Compounding Periods Find the future values of the following...
Future Value of an Annuity for Various Compounding Periods Find the future values of the following ordinary annuities: FV of $200 paid each 6 months for 9 years at a nominal rate of 12%, compounded semiannually. Round your answer to the nearest cent. $ FV of $100 paid each 3 months for 9 years at a nominal rate of 12%, compounded quarterly. Round your answer to the nearest cent. $
Future Value of an Annuity for Various Compounding Periods Find the future values of the following...
Future Value of an Annuity for Various Compounding Periods Find the future values of the following ordinary annuities: FV of $800 paid each 6 months for 7 years at a nominal rate of 12%, compounded semiannually. Round your answer to the nearest cent. $ FV of $400 paid each 3 months for 7 years at a nominal rate of 12%, compounded quarterly. Round your answer to the nearest cent. $
You want to buy a car, and a local bank will lend you $25,000. The loan...
You want to buy a car, and a local bank will lend you $25,000. The loan will be fully amortized over 5 years (60 months), and the nominal interest rate will be 4% with interest paid monthly a. What will be the monthly loan payment? Round your answer to the nearest cent. b. What will be the loan's EAR? Round your answer to two decimal places. Finding the required interest rate Your parents will retire in 23 years. They currently...
For EACH of the following cases in the following table: a. Calculate the future value at...
For
EACH of the following cases in the following table:
a. Calculate the future value at the end of the specified
deposit period.
b. Determine the effective annual rate, EAR.
c. Compare the nominal annual rate, r, to the effective annual
rate, EAR. What relationship exists between compounding frequency
and the nominal and effective annual rates?
Compounding frequency, Deposit period (times/year) (years) Nominal annual rate, Case 7% Amount of initial deposit $2,400 $48,000 $900 $20,000 11% 6% 17% Print Done...
PLEASE ANSWER THIS TWO QUESTION THANK YOU Different compounding periods, are used for different types of...
PLEASE ANSWER THIS TWO QUESTION
THANK YOU
Different compounding periods, are used for different types of investments. In order to properly compare investments or loans with different compounding periods, we need to put them on a common basis. In order to do this, you need to understand the difference between the nominal interest rate (INOM) and the effective annual rate (EAR). The nominal interest rate is quoted by borrowers and lenders, and it is also called the annual percentage rate...
Compounding frequency, time value, and effective annual rates For each of the cases in the following...
Compounding frequency, time value, and effective annual rates For each of the cases in the following table,囲 a. Calculate the future value at the end of the specified deposit period b. Determine the effective annual rate, EAR. c. Compare the nominal annual rate, r, to the effective annual rate, EAR. What relationship exists between compounding frequency and the nominal and effective annual rates? a. The future value of case A at the end of year 7 is d to the...
Changing compounding frequency Using annual, semiannual, and quarterly compounding periods, (1) calculate the future value if $4,000 is deposited initially at 1 1% annual interest for 6 years, and (2) determine the effective annual rate (EAR) (1) The future value, FVn is (Round to the nearest cent) (2 If the 11% annual nominal rate is compounded annually, the EAR is 96 Round to two decimal places. (1) The future value, FVn, is S(Round to the nearest cent.) (2) If the...
Changing compounding frequency Using annual, semiannual, and quarterly compounding periods, (1) calculate the future value if $6,000 is deposited initially at 11% annual interest for 7 years, and (2) determine the effective annual rate (EAR) Annual Compounding (1) The future value, Vn, is (Round to the nearest cent.) 2) If the 11% annual nominal rate is compounded annually the EAR is 96 Round to two decimal places Semiannual Compounding (1) The future value, Vn, is (Round to the nearest cent.)...
P5-38 Changing compounding frequency Using annual, semiannual, and quarterly com- pounding periods for each of the following, (1) calculate the future value if $5,000 is deposited initially, and (2) determine the effective annual rate (EAR). a. At 12% annual interest for 5 years. b. At 16% annual interest for 6 years. c. At 20% annual interest for 10 years.
I can't make excel figure out the continuous interest. (#4)
You plan to invest $2,100 in an individual retirement arrangement (IRA) today at a nominal Compounding frequency and time value Personal Finance Problem annual rate of 8%, which is expected to apply to all future years. a. How much will you have in the account at the end of 9 years if interest is compounded (1) annually, (2) semiannually, (3) daily (assume a 365-day year), and (4) continuously? b. What...
You want to buy a car, and a local bank will lend you $25,000. The loan will be fully amortized over 5 years (60 months), and the nominal interest rate will be 4% with interest paid monthly a. What will be the monthly loan payment? Round your answer to the nearest cent. b. What will be the loan's EAR? Round your answer to two decimal places. Finding the required interest rate Your parents will retire in 23 years. They currently...
For
EACH of the following cases in the following table:
a. Calculate the future value at the end of the specified
deposit period.
b. Determine the effective annual rate, EAR.
c. Compare the nominal annual rate, r, to the effective annual
rate, EAR. What relationship exists between compounding frequency
and the nominal and effective annual rates?
Compounding frequency, Deposit period (times/year) (years) Nominal annual rate, Case 7% Amount of initial deposit $2,400 $48,000 $900 $20,000 11% 6% 17% Print Done...
PLEASE ANSWER THIS TWO QUESTION
THANK YOU
Different compounding periods, are used for different types of investments. In order to properly compare investments or loans with different compounding periods, we need to put them on a common basis. In order to do this, you need to understand the difference between the nominal interest rate (INOM) and the effective annual rate (EAR). The nominal interest rate is quoted by borrowers and lenders, and it is also called the annual percentage rate...
Compounding frequency, time value, and effective annual rates For each of the cases in the following table,囲 a. Calculate the future value at the end of the specified deposit period b. Determine the effective annual rate, EAR. c. Compare the nominal annual rate, r, to the effective annual rate, EAR. What relationship exists between compounding frequency and the nominal and effective annual rates? a. The future value of case A at the end of year 7 is d to the...
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