CORPORATE FINANCE(LL)
11th Edition
ISBN: 9781260430011
Author: Ross
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 4, Problem 75QP
Rule or 69.3 A corollary to the Rule of 72 is the Rule of 69.3. The Rule of 69.3 is exactly correct except for rounding when interest rates are compounded continuously. Prove the Rule of 69.3 for continuously compounded interest.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
What would you expect the nominal rate of interest to be if the real rate is 2.75% and the expected inflation rate is 13.5%? Use two decimal places – show work.
Using the following information, determine the real rate of interest:
Rate
%
inflation
0.53
T-bill
5.00
10y T-Bond
6.00
10y AAA Corporate
6.41
10y AA Corporate
7.52
note: your answer should be to 2 decimal places. So, if your answer is 3.253%, for example, then enter 3.25 without the percent sign.
16. Which of the following statements is true?
Select one:
a.
The nominal interest rate is always greater than the effective interest rate
b.
The effective interest rate always equals the nominal interest rate
c.
The effective interest rate is always greater than or equal to the nominal interest rate
d.
The effective interest rate is always less than or equal to the nominal interest rate
Chapter 4 Solutions
CORPORATE FINANCE(LL)
Ch. 4 - Prob. 1CQCh. 4 - Prob. 2CQCh. 4 - Prob. 3CQCh. 4 - Prob. 4CQCh. 4 - Time Value On subsidized Stafford loans, a common...Ch. 4 - Prob. 6CQCh. 4 - Prob. 7CQCh. 4 - Prob. 8CQCh. 4 - Prob. 9CQCh. 4 - Prob. 10CQ
Ch. 4 - Simple Interest versus Compound Interest First...Ch. 4 - Prob. 2QPCh. 4 - Prob. 3QPCh. 4 - Prob. 4QPCh. 4 - Prob. 5QPCh. 4 - Prob. 6QPCh. 4 - Calculating Present Values Imprudential, Inc., has...Ch. 4 - Calculating Rates of Return Although appealing to...Ch. 4 - Perpetuities An investor purchasing a British...Ch. 4 - Prob. 10QPCh. 4 - Prob. 11QPCh. 4 - Prob. 12QPCh. 4 - Calculating Annuity Present Value An investment...Ch. 4 - Calculating Perpetuity Values The Perpetual Life...Ch. 4 - Calculating EAR Find the EAR in each of the...Ch. 4 - Calculating APR Find the APR, in each of the...Ch. 4 - Calculating EAR First National Bank charges 10.3...Ch. 4 - Interest Rates Well-known financial writer Andrew...Ch. 4 - Calculating Number of Periods One of your...Ch. 4 - Prob. 20QPCh. 4 - Prob. 21QPCh. 4 - Simple Interest versus Compound Interest First...Ch. 4 - Calculating Annuities You are planning to save for...Ch. 4 - Prob. 24QPCh. 4 - Prob. 25QPCh. 4 - Prob. 26QPCh. 4 - Prob. 27QPCh. 4 - Annuity Present Values What is the present value...Ch. 4 - Annuity Present Values What is the value today of...Ch. 4 - Balloon Payments Audrey Sanborn has just arranged...Ch. 4 - Prob. 31QPCh. 4 - Prob. 32QPCh. 4 - Growing Annuity Southern California Publishing...Ch. 4 - Growing Annuity Your job pays you only once a year...Ch. 4 - Prob. 35QPCh. 4 - Prob. 36QPCh. 4 - Prob. 37QPCh. 4 - Calculating Loan Payments You need a 30-year,...Ch. 4 - Prob. 39QPCh. 4 - Calculating Present Values You just won the TVM...Ch. 4 - Prob. 41QPCh. 4 - Prob. 42QPCh. 4 - Prob. 43QPCh. 4 - Prob. 44QPCh. 4 - Prob. 45QPCh. 4 - Prob. 46QPCh. 4 - Prob. 47QPCh. 4 - Prob. 48QPCh. 4 - Prob. 49QPCh. 4 - Prob. 50QPCh. 4 - Calculating Annuities Due You want to lease a set...Ch. 4 - Prob. 52QPCh. 4 - Prob. 53QPCh. 4 - Prob. 54QPCh. 4 - Prob. 55QPCh. 4 - Prob. 56QPCh. 4 - Prob. 57QPCh. 4 - Prob. 58QPCh. 4 - Prob. 59QPCh. 4 - Prob. 60QPCh. 4 - Prob. 61QPCh. 4 - Prob. 62QPCh. 4 - Prob. 63QPCh. 4 - Prob. 64QPCh. 4 - Calculating the Number of Periods Your Christmas...Ch. 4 - Prob. 66QPCh. 4 - Prob. 67QPCh. 4 - Prob. 68QPCh. 4 - Prob. 69QPCh. 4 - Perpetual Cash Flows What is the value of an...Ch. 4 - Prob. 71QPCh. 4 - Prob. 72QPCh. 4 - Prob. 73QPCh. 4 - Prob. 74QPCh. 4 - Rule or 69.3 A corollary to the Rule of 72 is the...Ch. 4 - Prob. 1MCCh. 4 - Prob. 2MCCh. 4 - Prob. 3MCCh. 4 - Prob. 4MCCh. 4 - Prob. 5MCCh. 4 - Prob. 6MC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- 51. Which of the following depicts the process of computing the present value of an interest-bearing term note with an unrealistic interest rate? a. PV = Principal Amount X PV Factor for single payment b. PV = (Principal Amount X PV Factor for single payment) + [(Principal Amount X Nominal Rate) X PV Factor for ordinary annuity)] c. PV = Installment Amount X PV Factor for ordinary annuity d. PV = [Installment Amount + (Remaining Principal Amount X Nominal Rate)] X PV Factor for single payment (for each year)arrow_forwardSolve for the unknown interest rate in each of the following (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.):arrow_forwardSuppose the real rate is 3.5 percent and the inflation rate is 2 percent. What rate would you expect to see on a Treasur bill? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g 32.16.)arrow_forward
- Which of the following statements is true?a. When the interest rate increases, the present value of asingle amount decreases.b. When the number of interest periods increases, thepresent value of a single amount increases.c. When the interest rate increases, the present value of anannuity increases.d. None of the above are true.arrow_forwardSuppose the real rate is 3.3 percent and the inflation rate is 2.4 percent. What rate would you expect to see on a Treasury bill? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)arrow_forwardFind the effective rate of interest corresponding to a nominal rate of 5.5% compounded seminannually. Answer choices: 5.645% 5.91% 5.558% 5.569%arrow_forward
- For part d, told to manipulate the equation: ΔM(t)= rM(t)Δt M(t) represents the money value at time t E is the final value of the note r is the interest rate Δt is expiration minus today's datearrow_forwardThe real rate of interest is the: a.rate assuming no inflation b.observed rate of interest c.market rate of interest d.None of the above.arrow_forwardFind the interest rate implied by the following combinations of present and future values. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Leave no cells blank and enter 0 where required. Present Value Years Future Value Interest Rate % $420 10 826 193 3 257 320 6 320arrow_forward
- If Treasury bills are currently paying 6.35 percent and the inflation rate is 1.6 percent, what is the approximate and the exact real rate of interest? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) A. approximate real rate B. exact real ratearrow_forwardWhen the total interest charged is linearly proportional to the initial amount of the loan, the interest rate and the number of interest periods, the interest is said to be a.) Effective b.) Continuous Compounding c.) Simple d.) Compoundingarrow_forwardClassify the following event as mostly systematic, mostly unsystematic: "Short-term interest rates increase unexpectedly" a. Systematic b. Unsystematic Calculate the arithmetic mean return of the following returns Date Return 11/01/2018 9.25% 11/14/2018 6.51% 12/01/2018 -4.61% 12/14/2018 9.14% NOTE: Enter the PERCENTAGE number rounding to two decimals. If your decimal answer is 0.034576, your answer must be 3.46. DO NOT USE the % signarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
What Does ROI (Return On Investment) Really Mean?; Author: REtipster;https://www.youtube.com/watch?v=Z6ThJvNr1Dw;License: Standard Youtube License