Problem 9: If the nominal interest rate is 21.00 percent, what is the effective interest rate...
Problem 2.2 Effective interest rate Given: The nominal interest rate is 7%. You wish to know the difference in the frequency of compounding Find: The effective (annual) interest rate if the nominal interest rate of 7% is compounded (a) quarterly, (b) monthly, (c) weekly, (d) daily, and (e) continuously. Solution:
Problem 2.2 Effective interest rate Given: The nominal interest rate is 7%. You wish to know the difference in the frequency of compounding Find: The effective (annual) interest rate if the nominal interest rate of 7% is compounded (a) quarterly, (b) monthly, (c) weekly, (d) daily, and (e) continuously. Solution
a. For an interest rate of 100% per year compounded continuously, calculate the effective daily, weekly, monthly, quarterly, semiannually, and annually interest rates. b. An investor requires an effective return of at least 12% per year. What is the minimum annual nominal rate that is acceptable for continuous compounding?
2.30 For a 15 percent effective annual interest rate, what is the nominal interest rate if (a) Interest is compounded monthly? (b) Interest is compounded daily (assume 365 days per year)? (c) Interest is compounded continuously?
Problem 4 - If interest rate is 15% per year. Find the nominal interest rate equivalent to 15% if: 1. Compounding is every three months (quarterly) 2. Compounded hourly 3. Compounded continuously Note: Use 4 decimal points like 15.3542%
3) What is the effective monthly interest rate for a loan with a 12% nominal annual interest rate if the loan is compounded (a) semi-annually, (b) monthly, or (c) continuously? (to 5 decimal places)
Problem 8: Suppose that the nominal interest rate is 9 percent compounded monthly. We want to compare $10,000 received today to $15,000 received in 5 years. (a) (3 pts.) What is the future value of the amount received today (S)? (b) (2 pts.) What is the nominal interest rate (percent) at which the amount received today would increase to the amount being offered in the future? (be accurate to at least two decimal places)
2. What nominal annual interest rate compounded monthly is equivalent to an effective annual interest rate of 8% per year for the first 10 years followed by a nominal annual interest rate of 5% compounded daily for the second 10 years? Give your answer as a percent rounded to three decimal places. Answer:
Suppose that the nominal annual interest rate on an investment is 12%. Calculate the effective interest rate if compounding occurs continuously. Suppose that the nominal annual interest rate on an investment is 12% Calculate the effective interest rate if compounding occurs monthly.
a. If you are told that your effective annual interest rate is 10%, what is the nominal interest rate compounded quarterly? b. What is the effective annual interest rate if the nominal interest rate is 7%, and the frequency of compounding is once a month? c. How much time would it take for your principal to quadruple if the effective annual interest rate is 5%, and the frequency of compounding is once a year?