Asked by Gisselle Leyva on May 30, 2024
Verified
What is the significance of two nominal interest rates being equivalent?
Nominal Interest
The stated interest rate of a loan or investment, not accounting for inflation or compounding effects.
Equivalent
Something that is equal in value, function, or meaning to another in a specified context.
- Analyze the equivalent interest rates among different compounding intervals.
- Assess the repercussions of differing compounding periods on the effective interest rate.
Verified Answer
TC
Taryn CurlessMay 31, 2024
Final Answer :
If two nominal interest rates are equivalent, they will produce the same future value of an investment after one year.
Learning Objectives
- Analyze the equivalent interest rates among different compounding intervals.
- Assess the repercussions of differing compounding periods on the effective interest rate.