Converting Nominal Interest Rates to Different Compounding Periods

✔ https://StudyForce.com
✔ https://Biology-Forums.com
✔ Ask questions here: https://Biology-Forums.com/index.php?board=33.0

Follow us:

▶ Facebook: https://facebook.com/StudyForcePS/
▶ Instagram: https://instagram.com/biologyforums/
▶ Twitter: https://twitter.com/studyforceps

Sometimes the compounding period of the interest on a loan will not match the when deposits are expected to be made. For example, you are expected to make monthly mortgage payments, but the interest is compounded semi-annually. In cases like these, we must convert the nominal rate to an equivalent rate that matches the timing of the cash flows.

Q1. Find the equivalent rate of interest for a loan rated at 8% compounded semi-annually to interest compounded annually.

Note: When finding the equivalent annual rate, it is called the effective annual rate.

Q2. Find the equivalent rate of interest for a loan rated at 3.5% compounded monthly to interest compounded semi-annually.

Видео Converting Nominal Interest Rates to Different Compounding Periods канала Study Force