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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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 Spring '14

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