Effective Rates COLLAPSE What is the effective rate of 16% compounded daily, mon

Question

Effective Rates COLLAPSE

1. What is the effective rate of 16% compounded daily, monthly, quarterly, semi-annually, annually?
2. If the effective rate is 12% and compounding is quarterly, compute the nominal rate?
3. You want to invest your money. Bank 1 offers you a rate of 8.5% compounded quarterly. Bank 2 offers you a rate of 8.2% compounded daily. Bank 3 offers you a rate of 8.75% compunded semi-annually. Bank 4 offers you an effective rate of 8.85%. Which bank would you choose?
4. In problem 3, would you change your answer if you were borrowing from one of these banks?

Effective Rates COLLAPSE Effective Rates Effective Rates COLLAPSE

1. What is the effective rate of 16% compounded daily, monthly, quarterly, semi-annually, annually?
2. If the effective rate is 12% and compounding is quarterly, compute the nominal rate?
3. You want to invest your money. Bank 1 offers you a rate of 8.5% compounded quarterly. Bank 2 offers you a rate of 8.2% compounded daily. Bank 3 offers you a rate of 8.75% compunded semi-annually. Bank 4 offers you an effective rate of 8.85%. Which bank would you choose?
4. In problem 3, would you change your answer if you were borrowing from one of these banks?

1. What is the effective rate of 16% compounded daily, monthly, quarterly, semi-annually, annually?
2. If the effective rate is 12% and compounding is quarterly, compute the nominal rate?
3. You want to invest your money. Bank 1 offers you a rate of 8.5% compounded quarterly. Bank 2 offers you a rate of 8.2% compounded daily. Bank 3 offers you a rate of 8.75% compunded semi-annually. Bank 4 offers you an effective rate of 8.85%. Which bank would you choose?
4. In problem 3, would you change your answer if you were borrowing from one of these banks?

1. What is the effective rate of 16% compounded daily, monthly, quarterly, semi-annually, annually?
2. If the effective rate is 12% and compounding is quarterly, compute the nominal rate?
3. You want to invest your money. Bank 1 offers you a rate of 8.5% compounded quarterly. Bank 2 offers you a rate of 8.2% compounded daily. Bank 3 offers you a rate of 8.75% compunded semi-annually. Bank 4 offers you an effective rate of 8.85%. Which bank would you choose?
4. In problem 3, would you change your answer if you were borrowing from one of these banks?

1. What is the effective rate of 16% compounded daily, monthly, quarterly, semi-annually, annually?
2. If the effective rate is 12% and compounding is quarterly, compute the nominal rate?
3. You want to invest your money. Bank 1 offers you a rate of 8.5% compounded quarterly. Bank 2 offers you a rate of 8.2% compounded daily. Bank 3 offers you a rate of 8.75% compunded semi-annually. Bank 4 offers you an effective rate of 8.85%. Which bank would you choose?
4. In problem 3, would you change your answer if you were borrowing from one of these banks?

1. What is the effective rate of 16% compounded daily, monthly, quarterly, semi-annually, annually?
2. If the effective rate is 12% and compounding is quarterly, compute the nominal rate?
3. You want to invest your money. Bank 1 offers you a rate of 8.5% compounded quarterly. Bank 2 offers you a rate of 8.2% compounded daily. Bank 3 offers you a rate of 8.75% compunded semi-annually. Bank 4 offers you an effective rate of 8.85%. Which bank would you choose?
4. In problem 3, would you change your answer if you were borrowing from one of these banks?

1. What is the effective rate of 16% compounded daily, monthly, quarterly, semi-annually, annually?
2. If the effective rate is 12% and compounding is quarterly, compute the nominal rate?
3. You want to invest your money. Bank 1 offers you a rate of 8.5% compounded quarterly. Bank 2 offers you a rate of 8.2% compounded daily. Bank 3 offers you a rate of 8.75% compunded semi-annually. Bank 4 offers you an effective rate of 8.85%. Which bank would you choose?
4. In problem 3, would you change your answer if you were borrowing from one of these banks?

1. What is the effective rate of 16% compounded daily, monthly, quarterly, semi-annually, annually?
2. If the effective rate is 12% and compounding is quarterly, compute the nominal rate?
3. You want to invest your money. Bank 1 offers you a rate of 8.5% compounded quarterly. Bank 2 offers you a rate of 8.2% compounded daily. Bank 3 offers you a rate of 8.75% compunded semi-annually. Bank 4 offers you an effective rate of 8.85%. Which bank would you choose?
4. In problem 3, would you change your answer if you were borrowing from one of these banks?

1. What is the effective rate of 16% compounded daily, monthly, quarterly, semi-annually, annually?
2. If the effective rate is 12% and compounding is quarterly, compute the nominal rate?
3. You want to invest your money. Bank 1 offers you a rate of 8.5% compounded quarterly. Bank 2 offers you a rate of 8.2% compounded daily. Bank 3 offers you a rate of 8.75% compunded semi-annually. Bank 4 offers you an effective rate of 8.85%. Which bank would you choose?
4. In problem 3, would you change your answer if you were borrowing from one of these banks?

1. What is the effective rate of 16% compounded daily, monthly, quarterly, semi-annually, annually?
2. If the effective rate is 12% and compounding is quarterly, compute the nominal rate?
3. You want to invest your money. Bank 1 offers you a rate of 8.5% compounded quarterly. Bank 2 offers you a rate of 8.2% compounded daily. Bank 3 offers you a rate of 8.75% compunded semi-annually. Bank 4 offers you an effective rate of 8.85%. Which bank would you choose?
4. In problem 3, would you change your answer if you were borrowing from one of these banks?

What is the effective rate of 16% compounded daily, monthly, quarterly, semi-annually, annually? If the effective rate is 12% and compounding is quarterly, compute the nominal rate? You want to invest your money. Bank 1 offers you a rate of 8.5% compounded quarterly. Bank 2 offers you a rate of 8.2% compounded daily. Bank 3 offers you a rate of 8.75% compunded semi-annually. Bank 4 offers you an effective rate of 8.85%. Which bank would you choose? In problem 3, would you change your answer if you were borrowing from one of these banks?

Explanation / Answer

1)

16/365 (days) equal to daily effective rate of 0.044% = 17.347% yearly compounded

16/12 (months) equal to monthly effective rate of 1.333 = 17.227% yearly compounded

16/4 (quarters) = to quarterly effective rate of 4% = 16.986% yearly compounded

16/2 (semi-annually) = 8% = 16.640% yearly compounded

16/1 (annually) = 16% annually

2)

The nominal rate is 11.495%

The nominal interest rate is calculated in the following way, where i is the nominal rate, r the effective annual rate, and n the number of compounding periods per year (for example, 12 for monthly compounding or 4 for quarterly compounding, etc):
i = n

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