C Secure I https://ng.cengage.com/static/nb/ui/index.html?nbld-82 5% MINDTAP FIN
ID: 2618650 • Letter: C
Question
C Secure I https://ng.cengage.com/static/nb/ui/index.html?nbld-82 5% MINDTAP FIN 331 AOL FINAL REVIEW Due Tomorrow at 4 PM CDT An investor can invest money with a particular bank and earn a stated interest rate of 13.20%; however, interest be compounded quarterly. What are the nominal, periodic, and effective interest rates for this investment opportunity? 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 12%, But the ban is compounding semiannually. What is the effective interest rate that Rahul would pay for the loan? o 12.537% o 12.481% o 12.238% 12.360% Another bank is alsc offering thn loon contract at 14% compounded daily for nne months. Based on a 36s-day rror. what is the total amount tha Rahut owes the bank at the end of the loen's term? (Hint: To cekculote the number of days, divide the number of months by 12 and muitiply by 365.) favorable terms, so Rahul decides to take a loan of 514,000 from this bank. He signs O 515, 549.94 O 516,171 94 O 516,482.94 O 515,238.94 vpe here to seExplanation / Answer
a.
Effective interest rate for semiannual compounding = (1+12%/2)^2 -1
= (1+12%/2)^2 -1
= 12.360%
b. Correct option is > = $15,549.94
PV = Present value = Loan = $14000
Rate = 14%
m = Compounding frequency = 365
n = year(s) = 9 months = 9/12 = 0.75
FV = ?
Formula for FV:
FV = PV x (1+R/m)^(m x n)
FV = 14000 x (1+14%/365)^(365 x 0.75)
FV = $15,549.64 (rounding off difference)
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