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Effective Rates COLLAPSE What is the effective rate of 16% compounded daily, monthly, quarterly, semi-annually, annually? If the effective rate is 12% and compounding is

Effective Rates

COLLAPSE

What is the effective rate of 16% compounded daily, monthly, quarterly, semi-annually, annually?

If the effective rate is 12% and compounding is quarterly, compute the nominal rate?

You want to invest your money. Bank 1 offers you a rate of 8.5% compounded quarterly. Bank 2 offers you a rate of 8.2% compounded daily. Bank 3 offers you a rate of 8.75% compunded semi-annually. Bank 4 offers you an effective rate of 8.85%. Which bank would you choose?

In problem 3, would you change your answer if you were borrowing from one of these banks?

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