Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Concept explainers

Effective Interest Rate
The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.
Question

Find the equivalent interest rates to the given nominal interest rates.

a. Nominal interest rate compounded quarterly that is equivalent to an effective interest rate of 8.5%

%

Round to two decimal places

b. Nominal interest rate compounded monthly that is equivalent to 7.5% compounded quarterly

%

Round to two decimal places

c. Nominal interest rate compounded quarterly that is equivalent to 8% compounded annually

%

Round to two decimal places

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