Question
2. There are two forms of interest rates. They are the Nominal Interest Rate (NIR) and the Effective Interest Rate (EIR). (a) Provide the difference
2. There are two forms of interest rates. They are the Nominal Interest Rate (NIR) and the Effective Interest Rate (EIR).
(a) Provide the difference between nominal and effective interest rates. ( 4 mark )
(b) Justify the payment period and the compounding period for the problems below:
- If a person deposits money every year and interest is compounded quarterly.
- If a person deposits money each month into saving account that pays an NIR of 8% per year compounded semiannually. ( 6mark )
(c) A manufacturing company from Korea plans to place money in a new venture capital fund that currently returns 18% per year, compounded daily. Determine the effective annual rate for the periods below:
i. Yearly
ii. Semiannually ( 10 mark)
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Auditing Theory And Practice
Authors: C. William Thomas, Bart Ward, Emerson Henke
3rd Edition
0534920748, 978-0534920746
