How is the Equivalence Calculations made with Effective Interest Rates?

Q: What is market interest rate?

A: The interest rate in which borrowers and lenders borrow and lend money to each other is called…

Q: What is the two-step process can which performs deflation and discounting in market interest rate?

A: The two-step process which performs deflation and discounting is that it makes the cash flows…

Q: . What is the term structure of interest rates?

A: Answer: The term interest rate structure is the pattern of necessary returns, also referred to as…

Q: The difference between the nominal interest rate and the effectiveinterest rate.

A: The nominal interest rate is the interest rate paid annually without compounding period.  The…

Q: What happens, when greater the interest rate other things being equal?

A: NPV(Net Present Value) is used to analyze the profitability of the project. It is the difference…

Q: What does the formula developed for calculating compound interest express?

A: Answer: Compound interest is nothing but interest earned on interest. In case of simple interest…

Q: what is the interest rate

A: Interest rate is the rate at which the bank or any other lenders charges from the borrowers for…

Q: Can you explain what is Principles of Interest Rate Structure? and how do you do it

A: We assume the question refers to the Term Structure of Interest Rates.  Term structure describes the…

Q: direct and indirect relationships between balance of payment and inflation rate.

A:

Q: Interest rate parity; purchasing power parity

A: Both defined in next step

Q: Identify the MARR (or external interest rate)?

A: A minimum acceptable rate of return (MARR) is the all-out advantage that a speculator wants to pick…

Q: What is interest rate?

A: Answer: At a particular situation, an interest rate determines how much money a borrower promises to…

Q: please use a specific example to compare what is the discount rate% and what is the investment rate…

A: Explanation:-   Discount rate % on treasury bills: The income generated on the T-bill is equal to…

Q: Please explain the difference between the terms interest rate and required return by defining each.

A: The amount which is charged by the lender to the borrower in order the use assets is known as the…

Q: What is interest rate parity?

A: Interest rate parity: Interest rate parity is a theory concerning the association among spot…

Q: What is going interest rate?

A: An interest rate is the rate which is applicable on loan and the borrower has to pay the interest…

Q: What are the components of an interest rate?

A: Interest rate refers to the net charges that a lender makes on the principal amount provided to the…

Q: When is it recommended to compute the effective interest rate per payment period?

A: When there is a compounding of interest, then the EIR per payment period is recommended. As it is a…

Q: How is Compound Interest calculated?

A: Compound interest refers to the addition of interest amount to the principal. The concept of…

Q: How can we determine the Net Present-Worth Amounts at Varying Interest Rates?

A: Answer: Net present worth is an estimation method applied to various time intervals when cash flows…

Q: ond interest rates may differ from market interest rates because:

A: Bonds are priced by discounting future cash flows. Future cash flows include coupons and par value…

Q: clearly distinguish between norminal interest rate and effective interest rate

A: The term interest rate can be defined as the fixed income received on the investment. . There are…

Q: What do you think about the interest rate i for

A: A recession refers to the time period which is affected by a temporary economic decline during which…

Q: Explain The Real Rate of Interest?

A: A real interest rate is an interest rate adjusted to exclude inflation impact to indicate the…

Q: What are the implications of interest rate parity theorem.

A: Interest rate Parity:- The interest rate parity (IRP) theory states that the difference between the…

Q: What is the Rate of Interest?

A: Given  P= 10000 A=5000 n=1year r=?

Q: Define the term the effective interest rate covering the payment period?

A: Interest rates can be of two types- Simple interest rate- This is the interest rate stated in the…

Q: What do we mean by covered interest arbitrage parity? Explain in detail by a diagram.

A: Covered interest arbitrage: It is relationship between forward premium and interest rates. If…

Q: What is “imputed interest”? In what situations is it necessary to impute an interest rate for notes…

A: Imputed Interest: According to the Internal Revenue Service (IRS), an imputed interest is an…

Q: Distinguish between the initial rate of interest and the expected yield on an ARM. What is the…

A: Introduction: The adjustable rate mortgage is one of the method used to calculate the interest rate…

Q: Calculate a currency's foward premium or discount based on interest rate differentials.

A: Using Interest rate parity theory, forward rate are calculated as follows by assuming the two…

Q: What is the difference between the time periods being measured with real income and exchange rates?

A: When referring to an individual's income, real income is the amount of money earned after inflation…

Q: sly. What is the effective interest rate e

A: Introduction: Effective interest rate also known as effective annual rate(EAR)  is the interest that…

Q: Which are two types of interest rates are used in equivalence calculations?

A: Equivalence calculation is used for analysis of an investment or a project based upon the the…

Q: How VAT affects the interest rate?

A: Solution-Value Added Tax  A value-added tax (VAT) is a consumption tax placed on a product whenever…

Q: What are the forward rates of interest? How are they determined? What do they have to do with…

A: Forward rates of interest has basis as expectation of future interest rate that are implied in the…

Q: What is the difference between a fixed rate and an adjustable rate money market instrument?

A: Money Market instruments are the financial instruments available to the investor for the short term…

Q: What is the difference between GAAp and IFRS in financial instruments?

A: Accounting: It is the process of recording, classifying, summarizing all transactions of a business…

Q: Describe the Equivalence Calculations with Effective Interest Rates?

A: The effective interest rate is the real interest rate that is charged on the loan amount when the…

Q: Define implicit rate of interest.

A: Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from…

Q: How is NPW used as a Function of Interest Rate?

A: Present value computes the existing value of future benefits by discounting future worth with a…