Asked by Firzah Barawas on Jul 08, 2024
Verified
A loan at 6% compounded semi-annually requires equal monthly payments. What is the value of c? What is the approximate value of the periodic interest rate for one payment interval? Will the correct value be larger or smaller than your estimate? Explain.
Compounded Semi-annually
A method of computing interest where the interest is calculated and added to the principal twice a year.
Periodic Interest Rate
The interest rate applied to a loan or investment over a specific period of time, less frequently than annually.
- Employ multiple compounded interest rates over assorted intervals to evaluate the value of investments or loans.
- Familiarize oneself with the theory of ordinary general annuity and its employment in financial decision strategies.
Verified Answer
MB
Michael BaltasJul 15, 2024
Final Answer :
c=2/12=0.16‾c=2 / 12=0.1 \overline{6}c=2/12=0.16 The approximate value of the periodic interest rate is 6%/12 = 0.5% per month. The correct value will be smaller because when compounded 6 times, it must equal 3% per half year.
Learning Objectives
- Employ multiple compounded interest rates over assorted intervals to evaluate the value of investments or loans.
- Familiarize oneself with the theory of ordinary general annuity and its employment in financial decision strategies.
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