Let j be the compound interest rate for the t-year period from time s to time s + t, and let dj be the corresponding rate of discount for that time period. Show that (a) d; = 1+j d; (b) j = - dj %3D
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Use the definition of the effective rates of interest and discount.
j=[Amount at s+t - Amount at s] / [Amt at s].
d_j=[Amount at s+t - Amount at s] / [Amt at s+t].
For 8 items c & d, if j (d_j) is nominal then effective interest (resp. discount) every mth of a period is j^(m)/m (resp. d^(m)/m).
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