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Unformatted text preview: What interest rate am I really paying? .092/12 = .0077 (1.077)12 – 1 = 1.0960 – 1 = .0960 = 9.60% Problem • Which one would I want to take (from the point of view of the borrower) • Lender A: 10.40%, compounded monthly • Lender B: 10.90%, compounded annually • Lender C: 10.50%, compounded quarterly Problem • I have an Effective Annual Rate of 11.72%, compounded quarterly. What is the Nominal, quoted rate in this case? .1172 = [(1+ (Inom/4))^4] 1 1.1172 = [(1+ (Inom/4))^4] 1.1172^1/4 = 1+ (Inom/4) 1.0281 = 1+ (Inom/4) .0281 = Inom/4...
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 Spring '08
 SCHAEFF
 Interest Rates, Annual Percentage Rate, Compounding, Debt, Interest, Interest Rate, effective annual rate, Mortgage loan

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