The number of compounding periods in one year is called compounding frequency. The compounding frequency affects both the present and future values of cash flows.

An investor can invest money with a particular bank and earn a stated interest rate of 11.00%; however, interest will be compounded quarterly.

Complete the following table by computing the nominal (or stated), periodic, and effective interest rates for this investment opportunity.

Interest Rates	Value
Nominal rate
Periodic rate
Effective annual rate

Musashi needs a loan and is speaking to several lending agencies about their interest rates and loan terms. He particularly likes his local bank because he is being offered a nominal rate of 10.00%. However, since the bank is compounding its interest bimonthly (every two months), the loan will impose an effective interest rate of _(10.55%, 10.74%,10.43%,10.61%)_ on his loan.

Another bank is also offering favorable terms, so Musashi decides to take a loan of $17,000 from this bank. He signs the loan contract at 13.00% compounded daily for six months. Based on a 365-day year, what is the total amount that Musashi owes the bank at the end of the loans term? (Hint: To calculate the number of days, divide the number of months by 12 and multiply by 365.)

$18,140.95

$18,775.88

$19,048.00

$19,229.41