PRIN.OF CORPORATE FINANCE
PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 30, Problem 29PS
Summary Introduction

To determine: Percentage discount.

Summary Introduction

To determine: Monthly return.

Summary Introduction

To determine: Annual yield.

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A similar application for investment yields can be made in cases where monthly cash annuities will be received as a return on investment. For example, assume that an investor makes an investment of $51,593 and will receive $400 at the end of each month for the next 20 years (240 months). What annual rate of return, compounded monthly, would be earned on the $51,593?
If a bank was offering a nominal rate of return of 12% compounded monthly, what is the annual effective rate?
You see the following rate “X”: 0.3% compounded weekly A) What is the APR of X? B) What are the APY of X? C) When compared with rate “Y” that has EAR=16%, which rate would you pick if you were asked to borrow money at that rate for one year? Why?
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