Compounding Interest

Related BrainMass Solutions

• Compounding to give highest effective rate of interest

  379605 Compounding interests 25. The stated rate of interest is 10%. Which form of compounding will give the highest effective rate of interest? A. annual compounding B. monthly compounding C. daily compounding D. continuous compounding E.

• Differences in compounding of interest

  462077 Differences in compounding of interest How much difference does it make for a bank account whether there is continuous compounding of interest, or monthly or annual compounding?

• Frequency of compounding

  year= $103.81 =1103.81-1000 Thus the interest is maximum for daily compounding Answers which is best-daily, monthly or quarterly compounding with the help of an illustration.

• Daily vs. Monthly Compounding

  Given the same nominal rate, more frequent compounding will always result in a higher effective rate, because there is more time for interest payments to earn interest themselves.

• Semi-annual compounding

  Amount = Principal (1+r)^n, where r is the annual interest rate, n is the number of years. Thus interest rate factor in case of annual compounding: r=12%, n=10, Interest rate factor= 1.12^10= 3.105.

• Determining The Fair Value of A Coupon Bond

  This investor seeks 9.5 percent annual interest, or 4.75 percent interest per semi-annual compounding period (.095/2 compounding periods per year).

• Interest Problems

  Whereas in monthly compounding, it will take a whole month before a 1% interest is added, or for annual compounding, it will take a whole year to earn 1% interest. The money grown bigger on continuous compounding of interest.

• Calculate the highest effective rate of interest & explain

  a) Bank 1; 8% with monthly compounding b) Bank 2 ;8% with annual compounding c) Bank 3 ;8% with quaterly compounding d) Bank 4; 8% with daily compounding e) Bank 5; 7.8% with annual compounding See attached file.

• Effective rate of interest

  206398 Effective rate of interest You are interested in investing your money in a bank account. Which of the following banks provides you with the highest effective rate of interest? a. Bank 1; 8 percent with monthly compounding. b.

• Equivalent Annual Rate

  For this reason, it is important to be able to adjust the interest rate from daily, weekly, or monthly compounding to the EAR as if the interest were being compounded annually.