Question 1
A credit card charges a nominal annual interest rate of 18.0% convertible monthly.
Calculate the annual effective interest rate.
Time Value of Money
Turn every rate into a rate per period first. Then move each payment to one comparison date before you add anything.
Question 2
A car loan charges a nominal annual interest rate of 8.0% convertible quarterly.
Calculate the annual effective interest rate.
Question 3
A fund earns an annual effective interest rate of 10.0%.
Calculate the equivalent nominal annual rate of interest convertible monthly.
Question 4
A bond fund earns an annual effective interest rate of 6.5%.
Calculate the equivalent nominal annual rate of interest convertible semiannually.
Question 5
A one-year Treasury bill is priced using an annual effective discount rate of 6.0%.
Calculate the equivalent annual effective interest rate.