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    1) A company makes a $1,000 investment every year on December 31. Interest is 10% per year, but compounded semi-annually (every 6 months). They make 10 investments in all.

    a) Find the effective annual interest rate,
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    © BrainMass Inc. brainmass.com December 24, 2021, 8:38 pm ad1c9bdddf
    https://brainmass.com/economics/investments/effective-annual-interest-rate-297086

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    SOLUTION This solution is FREE courtesy of BrainMass!

    1) A company makes a $1,000 investment every year on December 31. Interest is 10% per year, but compounded semi-annually (every 6 months). They make 10 investments in all.

    a) Find the effective annual interest rate,

    Complete the table below with your answers, show work below or on separate sheet

    Question Answer Comment
    a Effective Annual rate= (1+5%)^2-1 =10.25%
    EAR is more than the Interest rate per annum

    EAR= (1+i)^m*n -1
    EaR= Effective Interest rate, m= number of compounding per year, n= number of years, i= Nominal rate of interest (Annual rate/number of compounding per year)

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    © BrainMass Inc. brainmass.com December 24, 2021, 8:38 pm ad1c9bdddf>
    https://brainmass.com/economics/investments/effective-annual-interest-rate-297086

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