Purchase Solution

annual interest rate

Not what you're looking for?

Ask Custom Question

Please see the attached file.

Attachments
Purchase this Solution

Solution Summary

The solution discusses what effective annual interest rate is this equivalent to.

Solution Preview

See the attached file.

1. Question 1
A financial institution charges 1.86% per quarter on credit purchases. What effective annual interest rate is this equivalent to?

Effective annual interest rate is

We will use the following formula:

EIR= (1+i)^m*n -1
EIR= Effective Interest rate, m= number of compounding per year, n= number of years, i= Annual nominal rate of interest

Here i=1.86%, m=4, n=1, EIR=?

EIR= 7.65%

2. Question 2a
Calculate the future worth at t=10 for a deposit of $10,000 now, earning a nominal rate of 7% compounded monthly.

Here we have to find out the compounded value of lumpsum
P=present value, F= Future value r= rate of interest n=duration
F=P*(1+r)^n

P= 100, Mothnly interest rate= r= 7%/12, n=10*12=120 months

$20,096.61 ...

Purchase this Solution


Free BrainMass Quizzes
Economic Issues and Concepts

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

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.

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.