Bookmarks People Window Help xy ? Aplia: Student Question MindTap-Ce nttps://cou

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Bookmarks People Window Help xy ? Aplia: Student Question MindTap-Ce nttps://courses.aplia.com/af/iservlet/quiz?ctxekarimm-0016&quiz; action-takeQuiz&quiz;_probGuid-QNAPCOA8010100000041ca 17. Nonannual compounding period As Aa The number of compounding periods in one year is called compounding frequency. The compounding frequency affects both the present and future values of cash flows. An investor can invest money with a particular bank and earn a stated interest rate of is.40%, however, interest war be compounded quarterly. What are the nominal, periocic, and effective interest rates for this investment opportunity? Interest Rates Nominal rate Periodic rate Effective annual rate You want to invest $17,000 and are looking for safe investment options. Your bank is offering you a certificate of deposit that pays a nominal rate of 14% that is compounded bimonthly (every two months). what is the effective rate of return that you will earn from this investment? 14.702% 15.026% 14.964% 14.843% suppose you decide to deposit $17,000 in a savings account that pays a nominal rate of 12%, but interest is compounded daily. Based on a 365-day year, how much would you have in the account after four months?7 (Hint To calculate the number of days, divide the number of months by 12 and multiply by 365.) O $18,313.15 $17,339.98 O $18,755,49 $17,693.86

Explanation / Answer

Nominal Rate 15.40% Periodic rate 3.85% (15.4/4) 3.85 Effective rate=((1+0.0385)^4)-1 0.163123964 Effective rate= 16.31% Number of compounding period in a year 6 Periodic Rate 2.33% (14/6) 2.333333 Effective rate of return=((1+0.0233333333)^6)-1 0.148425228 Effective rate of return= 14.843% Answer: 14.843% Number of days in 4 months=(4/12)*365 121.6666667 Annual interest compounded daily=12%= 0.12 Amount of deposit $17,000 Daily interest =0.12/365=    0.0003287671 Future Value of deposit after 4 months $17,693.86 (17000*((1+0.0003287671)^121.6666667)) Answer: $17,693.86

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