If a bank pays 0.5% interest per month, determine the nominal interest rate. Find the effective...

If a bank pays 0.5% interest per month, determine the nominal interest rate. Find the effective interest rate for (a) compounded monthly, (b) compounded quarterly, (c) compounded weekly, (d) compounded daily and (e) compounded continuously.

Solutions

Expert Solution

Rahul Sunny answered 11 months ago

Next > < Previous

Related Solutions

A bank lends you $20,000 at an interest rate of 0.5% per month for 24 months....

A bank lends you $20,000 at an interest rate of 0.5% per month for 24 months. You repay the loan in equal payments of $P each month. Give the formulae for the following quantities (i) the loan balance Am+1 after m + 1 months in terms of the loan balance Am after m months and the data. (ii) the monthly payment $P. (iii) What is the maximum interest expense that you will pay in any month? (iv) Do you expect...

Identify the following interest rate statements as either nominal or effective: (a) 1.3% per month; (b)...

Identify the following interest rate statements as either nominal or effective: (a) 1.3% per month; (b) 1% per week compounded weekly; (c) 15% per year compounded monthly; (d) effective 1.5% per month compounded daily; (e) 15% per year compounded semiannually; (f) 3% per quarter; (g) 3% per quarter compounded continuously.

Effective versus nominal interest rates Bank A pays 9% interest compounded annually on deposits, while Bank...

Effective versus nominal interest rates Bank A pays 9% interest compounded annually on deposits, while Bank B pays 8.5% compounded daily. Based on the EAR (or EFF%), which bank should you use? You would choose Bank A because its EAR is higher. You would choose Bank B because its EAR is higher. You would choose Bank A because its nominal interest rate is higher. You would choose Bank B because its nominal interest rate is higher. You are indifferent between...

If the effective interest rate is 20% per annum, What is the nominal rate if it...

If the effective interest rate is 20% per annum, What is the nominal rate if it is: a. Compounded daily (360 days) b. Compounded daily (365 days) c. Compounded weekly d. Compounded monthly e. Compounded quarterly f. Compounded semi-annnually g. Compounded annually

Suppose that the initial loan is $16,000 and the interest rate is 0.5% per month. Interest...

Suppose that the initial loan is $16,000 and the interest rate is 0.5% per month. Interest due is paid at end of each month. $8,000 of the original unpaid balance is to be repaid at the end of months two and three only. How much total interest would have been paid by the end of month three?

Suppose the annual effective interest rate on an account is 13.2%. Find the equivalent nominal interest...

Suppose the annual effective interest rate on an account is 13.2%. Find the equivalent nominal interest rate compounded monthly, the effective monthly interest rate, the equivalent discount rate compounded monthly, and the effective monthly discount rate.

A. An interest rate equals to 1% per month. What it will be the annual effective...

A. An interest rate equals to 1% per month. What it will be the annual effective interest rate? B. An interest rate equals to 4% per quarter compounded monthly. What it will be the annual effective interest rate? C. An interest rate equals to 7% per half-year (6months) compounded bi-annually (every two years). What it will be the annual effective interest rate?

You just deposited $25,000 in a bank account that pays a 12.0% nominal interest rate, compounded...

You just deposited $25,000 in a bank account that pays a 12.0% nominal interest rate, compounded semi-annually. If you also add another $3,000 to the account each year over the next five years, how much will be in the account five years from now?

You just deposited $2,500 in a bank account that pays a 4.0% nominal interest rate, compounded...

You just deposited $2,500 in a bank account that pays a 4.0% nominal interest rate, compounded quarterly. If you also add another $5,000 to the account one year (4 quarters) from now and another $7,500 to the account two years (8 quarters) from now, how much will be in the account three years (12 quarters) from now? Group of answer choices $18,563.53 $17,679.55 $16,035.88 $16,837.67 $15,234.08

You just deposited $3,500 in a bank account that pays a 4.0% nominal interest rate, compounded...

You just deposited $3,500 in a bank account that pays a 4.0% nominal interest rate, compounded quarterly. If you also add another $5,000 to the account one year (4 quarters) from now and another $7,500 to the account two years (8 quarters) from now, how much will be in the account three years (12 quarters) from now?

Subjects