Question
You receive a cash flow of 20,000$ and you plan to deposit it for a year in a saving account that offers an annual interest
You receive a cash flow of 20,000$ and you plan to deposit it for a year in a saving account that offers an annual interest rate of 16% with quarterly compounding. The teller asks you if you would consider a different account with annual compounding.
For which interest rate would you be indifferent to switch to annual compounding?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To find the interest rate at which you would be indifferent to switching from quarterly compounding ...
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Principles of Finance
Authors: Scott Besley, Eugene F. Brigham
6th edition
9781305178045, 1285429648, 1305178041, 978-1285429649
