Question
In: Finance
(a) What interest rate compounded monthly is equivalent to (has the same APY as) 15% compounded...
(a) What interest rate compounded monthly is equivalent to (has the same APY as) 15% compounded semi-annually? (b) What interest rate compounded continuously is equivalent to (has the same APY as) 15% compounded semi-annually?
Solutions
Expert Solution
(a) What interest rate compounded monthly is equivalent to (has the same APY as) 15% compounded semi-annually?
Effective Annual rate = ( 1 + Interest per period)^Periods per year] - 1
Effective Annual rate = 1.075^2 - 1
Effective Annual rate = 15.56%
Nominal Interest Rate Compounded monthly = (1 + Effective Interest Rate)^(1/Periods per year) - 1] * Periods per year
Nominal Interest Rate Compounded monthly = 1.1556^(1/12)-1] * 12
Nominal Interest Rate Compounded monthly = 1.01213-1] * 12
Nominal Interest Rate Compounded monthly = 14.55%
(b) What interest rate compounded continuously is equivalent to (has the same APY as) 15% compounded semi-annually?
Effective Annual rate = ( 1 + Interest per period)^Periods per year] - 1
Effective Annual rate = 1.075^2 - 1
Effective Annual rate = 15.56%
Nominal Interest Rate Compounded Continuously = Ln(1 + Effective Interest rate)
Nominal Interest Rate Compounded Continuously = Ln(1.1556)
Nominal Interest Rate Compounded Continuously = 14.46%
jeff jeffy answered 1 year agoRelated Solutions
What is the annual compounded monthly rate equivalent to 19% per annum compounded per quarter?
For an interest rate of 8% per year compounded monthly, what is the nominal interest rate...
What level rate of interest compounded annually is equivalent to 8% for the next 10 years...
The annual interest rate on a credit card is 18% with interest compounded monthly. If a...
What is the nominal rate of interest compounded monthly at which payments of $200 made at...
An interest rate of 21% per year, compounded every 4 months, is equivalent to what effective...
Bank A pays 15% interest, compounded monthly, on its money market account. What is the effective...
Which of the following APRs compounded monthly is equivalent to an APR of 14.15% compounded quarterly...
Find the effective interest rate fora) 10% compounded monthly?b) 12% compounded semiannually.
Given a nominal interest rate of 6.5% compounded semi-annually, compute: a) The equivalent nominal rate of...
- More and more adults are considering commuting to work by bicycle rather than car, but few...
- Please answer these questions Data Processing and Analysis using python. Thank you In statistics, an outlier...
- Write a function file that accepts each of the four vectors as inputs. The function file...
- Kant says that to act morally is to act out of duty. How does this differ...
- Suppose you are trying to determine the capacity (in gallons) of the gas tank needed on...
- List the arithmetic operators used in BASIC and state their priorities of execution in a statement....
- Describe the espoused values of a company you have worked for (or been exposed to -...