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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 Preview

    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 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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