Please answer ALL PARTS OF questions. If answers are clear and correct I will le

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Please answer ALL PARTS OF questions. If answers are clear and correct I will leave positive feedback! Thank you!

Back to Assignment Attempts: Keep the Highest: 2 4. Nonannual compounding perio a Aa The number of compounding periods in one year is called compounding frequency. The compounding frequency affects both the present and future values of cash flows. An investor can invest money with a particular bank and eam a stated interest rate of 15.40%; however, interest will be compounded quarterly. Whatare the nominal, periodic, and effective interest rates for this investment Interest Rates Nominal rate Periodic rate Effective annual rate Rahul needs a loan and is speaking to several lending agencies about the interest rates they would charge and the terms they offer. He particularly likes his local bank because he is being offered a nominal rate of 14%. But the bank is compounding quarterly. What is the effective interest rate that Rahul would pay for the loan? 14.630% 14.611% 14.873% 14.752% Another bank is also offering favorable terms, so Rahul decides to take a loan of $13,000 from this bank. He sign:s the loan contract at 15% compounded daily for nine months. Based on a 365-day year, what is the total amount that Rahul owes the bank at the end of the loan's term (Hint: To calculate the number of days, divide the number of months by 12 and multiply by 365.) O $14,402.42 O $15,129.82 O $15,420.77 O $14,547.90

Explanation / Answer

Answer a.

Nominal Rate = 15.40% compounded quarterly

Periodic Rate = Nominal Rate / Number of compounding per year
Periodic Rate = 15.40% / 4
Periodic Rate = 3.85%

Effective Annual Rate = (1 + Periodic Rate)^n - 1
Effective Annual Rate = (1 + 0.0385)^4 - 1
Effective Annual Rate = 1.0385^4 - 1
Effective Annual Rate = 1.1631 - 1
Effective Annual Rate = 0.1631
Effective Annual Rate = 16.31%

Answer b.

Effective Annual Rate = (1 + Nominal Rate/ n)^n - 1
Effective Annual Rate = (1 + 0.14 / 4)^4 - 1
Effective Annual Rate = 1.035^4 - 1
Effective Annual Rate = 1.1475 - 1
Effective Annual Rate = 0.1475
Effective Annual Rate = 14.75%

Answer c.

Amount Borrowed = $13,000
Annual Interest Rate = 15%
Daily Interest Rate = 15% / 365
Daily Interest Rate = 0.04110%

Number of days = 9 / 12 * 365
Number of days = 273.75

Amount owed after 9 years = $13,000 * (1 + 0.000411)^273.75
Amount owed after 9 years = $13,000 * 1.1191
Amount owed after 9 years = $14,547.90

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