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4. Bank A offers an 8 percent nominal interest rate, compounded monthly on its savings deposits. Bank B also offers an 8 percent nominal rate,
4. Bank A offers an 8 percent nominal interest rate, compounded monthly on its savings deposits. Bank B also offers an 8 percent nominal rate, but compounds continuously. Compare the two alternatives on the basis of (a) the future value of $5,000 in 5 years; and (b) the effective annual interest rate. Is continuous compounding a significant advantage over the more typical monthly compounding
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Inside And Outside Liquidity
Authors: Bengt Holmstroem, Jean Tirole
1st Edition
0262518538, 9780262518536
