College Accounting, Chapters 1-27
23rd Edition
ISBN: 9781337794756
Author: HEINTZ, James A.
Publisher: Cengage Learning,
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Question
The general formula for Blank______ is (1 + Quoted rate / m)m – 1. (m denotes the number of times the interest is compounded during the year.)
Multiple choice question.
annual percentage rate (APR)
effective annual rate (EAR)
stated rate
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- Which of the following is the correct mathematical expression of effective annual rate (EAR)? (m denotes the number of times the interest is compounded during the year.) Multiple choice question. EAR = [1 − (Quoted rate/m)]m + 1 EAR = [1 + (Quoted rate/m)]m − 1 EAR = [1 + (Quoted rate/m)]m + 1 EAR = [1 − (Quoted rate/m)]m − 1arrow_forwardAn interest rate obtained by dividing the nominal rate per year by the number of compounding periods in that year isa. A nominal interest rateb. An effective interest ratec. An effective interest rate only if the compounding period is monthlyd. Either (b) or (c)arrow_forwardDetermine the effective rate of interest of the following nominal rates. a. nominal rates (Compounded annually) b. nominal rates (Compounded quarterly) c. nominal rates (Compounded continuously) nominal rate = 0.14arrow_forward
- Given an interest rate of 4.0% compounded monthly, determine the effective rate of interest. Answer as a percentage rounded to two decimal places. reff = Check %arrow_forwardFor the following investment, find the total number of compounding periods and the interest rate per period. Do not enter the percent symbol in your answer. Round percentage answer to two decimal places. Term of Nominal Interest Compounding Rate per Investment (Annual) Rate (%) Compounded Periods Period (%) 8 years quarterly %arrow_forwardneed answerrarrow_forward
- The n-year spot rate of interest, in, can be represented by: = 0.08 0.06 x exp(-0.1n) - Calculate, to 4 decimal places (in percentages), the 3-year forward rate at time 3, f 3,3-arrow_forwardFind the following: a. total number of conversion period b. conversion period per year c. interest rate per conversion period d. principal e. compound interestarrow_forwardThe (blank) interest rate is referred to as APR and the (blank) interest rate is the true rate considering compounding periods per yeararrow_forward
- accountarrow_forwardFor each of the following cases, indicate (a) to what interest rate columns and (b) to what number of periods you would refer in looking up the future value factor. (Round percentages to 2 decimal places, e.g. 5,275.)(1) In Table 1 (future value of 1): Annual Rate Number ofYears Invested Compounded Case A 4% 3 Annually Case B 9% 5 Semiannually (a) (b) Case A % periods Case B % periods (2) In Table 2 (future value of an annuity of 1): Annual Rate Number ofYears Invested Compounded Case A 6% 5 Annually Case B 12% 6 Semiannually (a) (b) Case A % periods Case B % periodsarrow_forwardssarrow_forward
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