Business, 26.02.2020 21:51 mmimay3501

For an interest rate of 12% per year compounded continuously, find (a) the nominal rate per year, (b) the nominal rate per quarter; (c) the effective rate per quarter, and (d) the effective rate per month. For an interest rate of 12% per year compounded continuously, find (a) the nominal rate per year, (b) the nominal rate per quarter; (c) the effective rate per quarter, and (d) the effective rate per month.

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Answer from: smilingntn33p7pqpp

a.12% per annum

b.12% per annum

c. 12.55% per quarter

d. 12.68% per month

Explanation:

a. The nominal Rate is the base rate per compounding which in this case is 12% which is the base rate charged.

b.the nominal rate per quarter is 12 % because nominal interest rate is the base interest rate which means it is the given rate used as reference to calculate other rats.

c.The effective interest rate is calculated as follows by using the formula"

ieffective = (1+ inom/n)^n -1

where ieffective is the effective interest rate we are looking for per quarter.

inom is the nominal interest rate given which is 12%.

n is the number of periods per compounding so in this case 4 which is quarterly therefore we substitute the values to the formula above.

i effective= (1+12%/4)^4 -1 the we compute

i effective = 0.1255 x 100 then we multiply by 100 to convert to percentage.

therefore ieffective = 12.55% per quarter.

d. we calculate the effective interest rate per month using the above mentioned formula for effective interest rate:

ieffective = (1+ inom/n)^n -1

ieffective = (1+ 12%/12)^12 -1 we compute with a calculator

ieffective = 0.1268 then we multiply by 100.

ieffective = 12.68% compounded monthly

Answer from: Quest

Secured loans are protected by collateral security. examples: title loans where the borrower uses the car title as collateral security interest rates are lower and repayments are longer therefore risk is low as a collateral security is given as guarantee to the bank in case of failure to pay the loanunsecured loans are not protected by collateral security but it is given on the creditworthiness of the borrower, trusting that she/he will pay on time. examples; payday loans is a short term loan where the borrower lends money from the bank and pays is back when the borrower receives his/her wages.interest rates are high and repayments are shorter. but the risk is high as no collateral security is given as a guarantee to the bank for payment of the loan

Answer from: Quest

answer; whoever is willing and able to pay the price;

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For an interest rate of 12% per year compounded continuously, find (a) the nominal rate per year, (b...