Purchase Solution

Effective Annual Interest Rate

Not what you're looking for?

Ask Custom Question

Which security has a higher effective annual interest rate (a or b)?

a. A 6-month T-bill selling at $96,525 with par value of $100,000.

b. A coupon bond selling at par paying a 10% coupon semiannually.

Please show calculations. I don't understand.

Purchase this Solution

Solution Summary

Effective annual interest rate determinations for a T bill and a coupon bond is provided.

Solution Preview

To find the effective interest rate, we use the formula r = [ (1+i/n)^n ] - 1, where r is the effective rate, i is the ...

Purchase this Solution


Free BrainMass Quizzes
Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.