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Different compounding periods, are used for different types of investments. In order to properly compare investments or loans with different compounding periods, we need to put them on a common basis. In order to do this, you need to understand the difference between the nominal interest rate (INOOM) and the effective annual rate (EAR). The -Select- v interest rate is quoted by borrowers and lenders, and it is also called the annual percentage rate (APR). If the compounding periods for different securities is the same, then you -Select- v use the APR for comparison. If the securities have different compounding periods, then the -Select- v must be used for comparison. Here, M is the number of compounding periods per year and INOM/M is equal to the periodic rate (IPER). If a loan or investment uses -Select- interest rate is also its effective annual rate. However, if compounding occurs more than once a year, EAR is -Select- v compounding, then the nominal v INOM- Quantitative Problem: Bank 1 lends funds at a nominal rate of 8% with payments to be made semiannually. Bank 2 requires payments to be made quarterly. If Bank 2 would like to charge the same effective annual rate as Bank 1, what nominal interest rate will they charge their customers? Do not round intermediate calculations. Round your answer to three decimal places. %

Different compounding periods, are used for different types of investments. In order to properly compare investments or loans with different compounding periods, we need to put them on a common basis. In order to do this, you need to understand the difference between the nominal interest rate (INOOM) and the effective annual rate (EAR). The -Select- v interest rate is quoted by borrowers and lenders, and it is also called the annual percentage rate (APR). If the compounding periods for different securities is the same, then you -Select- v use the APR for comparison. If the securities have different compounding periods, then the -Select- v must be used for comparison. Here, M is the number of compounding periods per year and INOM/M is equal to the periodic rate (IPER). If a loan or investment uses -Select- interest rate is also its effective annual rate. However, if compounding occurs more than once a year, EAR is -Select- v compounding, then the nominal v INOM- Quantitative Problem: Bank 1 lends funds at a nominal rate of 8% with payments to be made semiannually. Bank 2 requires payments to be made quarterly. If Bank 2 would like to charge the same effective annual rate as Bank 1, what nominal interest rate will they charge their customers? Do not round intermediate calculations. Round your answer to three decimal places. %

College Algebra
College Algebra
1st Edition
ISBN:9781938168383
Author:Jay Abramson
Publisher:Jay Abramson
Chapter6: Exponential And Logarithmic Functions
Section6.1: Exponential Functions
Problem 3SE: The Oxford Dictionary defines the word nominal asa value that is “stated or expressed but...
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Different compounding periods, are used for different types of investments. In order to properly compare investments or loans with different compounding periods, we need to put them on a common basis. In order to do this, you need to understand the difference between the nominal interest rate (INOM) and the effective annual rate (EAR). The -Select- v interest rate is quoted by borrowers and lenders, and it is also called the annual percentage rate (APR). If the compounding periods for different securities is the same, then you -Select- v use the APR for comparison. If the securities have different compounding periods, then the -Select- must be used for comparison. Here, M is the number of compounding periods per year and INOM/M is equal to the periodic rate (IPER). If a loan or investment uses -Select- v compounding, then the nominal interest rate is also its effective annual rate. However, if compounding occurs more than once a year, EAR is | -Select- INOM. Quantitative Problem: Bank 1 lends funds at a nominal rate of 8% with payments to be made semiannually. Bank 2 requires payments to be made quarterly. If Bank 2 would like to charge the same effective annual rate as Bank 1, what nominal interest rate will they charge their customers? Do not round intermediate calculations. Round your answer to three decimal places. %
Transcribed Image Text:Different compounding periods, are used for different types of investments. In order to properly compare investments or loans with different compounding periods, we need to put them on a common basis. In order to do this, you need to understand the difference between the nominal interest rate (INOM) and the effective annual rate (EAR). The -Select- v interest rate is quoted by borrowers and lenders, and it is also called the annual percentage rate (APR). If the compounding periods for different securities is the same, then you -Select- v use the APR for comparison. If the securities have different compounding periods, then the -Select- must be used for comparison. Here, M is the number of compounding periods per year and INOM/M is equal to the periodic rate (IPER). If a loan or investment uses -Select- v compounding, then the nominal interest rate is also its effective annual rate. However, if compounding occurs more than once a year, EAR is | -Select- INOM. Quantitative Problem: Bank 1 lends funds at a nominal rate of 8% with payments to be made semiannually. Bank 2 requires payments to be made quarterly. If Bank 2 would like to charge the same effective annual rate as Bank 1, what nominal interest rate will they charge their customers? Do not round intermediate calculations. Round your answer to three decimal places. %
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