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If a bank was offering a nominal rate of return of 12% compounded monthly, what is the annual effective rate?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 4QTD

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Question

If a bank was offering a nominal rate of return of 12% compounded monthly, what is the annual effective rate?

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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