Different compounding periods, are used for different types of investments. In order to properly compare investments or loans with different...
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Different compounding periods, are used for different types of investments. In order to properly compare investments or loans with different compounding periods, we need to put them on a common basis. In order to do this, you need to
understand the difference between the _ _ _)_. The interest rate is quoted by borrowers and lenders. and it is also called the _a_
If the compounding periods for different securities Is the same, then you E] use the APR for comparison. If the securities have different compounding periods, then the must he used for comparison. Here, M is the number of compounding periods per year and Imam/M is equai to the periodic rate (“253). If a loan or investment uses compounding, then the nominal interest rate is aiso iB effective annual rate. However, if compounding occurs more than once a year, EAR is INOM. Quantitative Problem: Bank 1 lends funds at a nominal rate of 6% with pavmenu to he made semiannuaiiy. Bank 2 requires paymenu to be made quarterly. If Bank 2 would like to charge the same effective annual late as Bank 1,
what nominal interest late will they charge their customers? Do not round intermediate calculations. Round your answer to three decimal places. Ebb

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