WK 1 TVM 2 - This is calculated using the following...

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Our text explains that the effective rate is the annual rate that produces the same result as if we had compounded at a given periodic rate m times per year. If the nominal annual rate is 10% and it is compounded semiannually, the effective rate is 10.250%.
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Unformatted text preview: This is calculated using the following equation: Effective rate (EAR) = (1+ inom/m) m -1.0. EAR = (1+ 0.10/2) 2 -1.0 EAR = (1+0.05) 2 1.0 EAR = 10.250%...
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This note was uploaded on 03/26/2012 for the course F1515 F1515 taught by Professor Stan during the Spring '10 term at Keller Graduate School of Management.

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