Question

What is the effective interest rate of 8%p.a. nominal interest rate when compounded monthly? Ans : 8.30% Pls attach the formula used, and explain in detail. Pls do not answer in excel format. Thank you in advance.

Answer #1

Effective interest rate = (1 + APR/n)^{n} - 1

Effective interest rate = (1 + 0.08/12)^{12} - 1

Effective interest rate = (1 + 0.00667)^{12} - 1

Effective interest rate = (1.00667)^{12} - 1

Effective interest rate = 1.0830 - 1

**Effective interest rate = 0.0830 or 8.30%**

As the frequency of compounding increases, the effective interest rate is greater. Here, interest on interest is getting added every month. Therefore, effective rate of 8% compounded monthly will always be greater than 8% compounded annually.

The Seri Kembangan Property Development Company has a RM10,000
note receivable from a customer due in three years. How much is the
note worth today if the interest rate is
a) 10% simple interest?
b) 12% compounded monthly?
c) 6% compounded quarterly?
d) 18% compounded monthly?
ANS : a) RM 7,692.31 b) RM 6,989.25 c) RM 8,363.87 d) RM
5,850.90
Pls attach the formula used, and explain in detail. Pls do not
answer in excel format. Thank you in advance.

Chong is negotiating a contract to do some work for HAC
Corporation over the next five years. HAC proposes to pay Chong
RM10,000 at the end of each of the third, fifth and seventh years.
No payments will be received prior to that time. If Chong discounts
these payments at 8% compounded semi anuually, what is the contract
worth to him today?
ANS : RM 20,433.54
Pls attach the formula used, and explain in detail. Pls do not
answer in...

What is the effective monthly interest rate for a loan with a 8%
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(c) continuously?
A friend offers you a loan at an effective daily interest rate
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the APR or Annual Percentage Rate) rate for this loan?
(b) What is the effective annual interest rate for
his loan?
Show all work please

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SHOW FORMULAS AND GET THUMBS UP

Convert an interest rate of 2% per quarter compounded monthly
into a nominal interest rate over the following time periods:
Quarter
Year
Semiannual
Decade
Please include any formulas used. Thanks in advance

Exercise IV (effective and nominal interest rate)
a. The effective interest rate is 21.44%. If there are 12
compounding periods per year, what is the nominal interest
rate?
b. What is the effective interest rate on a continuously
compounded loan that has a nominal interest rate of 25%?
c. Which is the better investment, a fund that pays 20%
compounded annually, or one that pays 18.5 % compounded
continuously?
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First Bank of Midesto Medeque pays a 8.14% nominal rate of
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How to calculate nominal interest rate given borrowed principal
of $100,000, fixed rate mortgage for 30 years, compounded monthly,
and payments due at the end of each month. What is the nominal
interest rate if you pay $599.55 per month.
Please do not use excel! I need to know what formula to use to
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RM60,000 is borrowed for 12 years at 5% compounded annually. The
borrower does not pay interest currently and will pay all accrued
interest at the end of 12 years together with the principal.
(a) Find the amount annual sinking fund deposit necessary to
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(b) Prepared a sinking fund schedule.
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Find the interest rates in the following situations.
a. APR = 8%, compounded monthly. Find the effective annual
interest rate.
b. Nominal rate is 10% compounded quarterly. Find the effective
semiannual rate.
c. The effective annual interest rate is 11.02% and compounding
is monthly. Find the nominal interest rate.
d. r = 6% and compounding is monthly. Find the effective
quarterly interest rate.

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