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Calculating effective and nominal interest rates

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1. What is the effective interest rate if nominal annual interest is 14.8% computed monthly?

2. What is the effective interest rate if nominal annual interest is 12.68% computed continuously?

3. What is the effective interest rate if nominal annual interest is 10.68% computed every 2 months?

4. What nominal annual interest is equivalent to an annual effective interest of 15.5% when computed continuously?

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Solution Summary

Solution depicts the steps to calculate the effective/nominal interest rate for the given cases. Calculations are carried out with the help of suitable formulas.

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1. What is the effective interest rate if nominal annual interest is 14.8% computed monthly?
Number of compounding=m=12
Nominal rate of interest=r=14.8%
Effective rate of ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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