If we have semiannual cash flows we have to use an

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Unformatted text preview: mpounding Frequency -The annuity cash flow frequency determines the effective interest rate you have to use for compounding or discounting. – If we have annual cash flows, we need to use an effective annual interest rate (EAR) rYr. – If we have semi ­annual cash flows, we have to use an effective semi ­ annual interest rate rsemi. – With monthly cash flows, we would need an effective monthly interest rate rmo.  ­The annuity cash flow frequency also determines the units that n is in (i.e. the length of one perio...
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