Home
Flashcards
Preview
Question Types
Home
Get App
Take Quiz
Create
Calculate the equivalent nom. annual discount rate compounded
quarterly
dᵐ/m = (iᵐ/m) / (1+(iᵐ/m))
If we have two equivalent discount rates, use the following formula:
(1-(dᵐ/m))ᵐ = PVo = (1-(dᵖ/p))ᵖ
Force of int formula
AVt = PVo *eʳᵗ
If all you're given is r (force of interest):
1) Annual eff. int rate
2) Nom. annual int. rate convertible quarterly
3) Nom. annual discount rate convertible monthly
4) Annual eff. discount rate
1)eʳ = 1+i
(Solve for i)
2) eʳ = (1+(iᵐ/m))ᵐ
(Solve for i⁴)
3) eʳ = (1-(dᵖ/p))⁻ᵖ
(Solve for d¹²)
4) eʳ = (1-d)⁻¹
(Solve for d)
... "compounded semiannually"
AVt = PVo(1+(iᵐ/2)²ᵗ
... "convertible monthly"
AVt = PVo(1+(iᵐ/12))¹²ᵗ
Nom. annual int. rate is ... Calculate the equiv. force of int. if we assume a compounding frequency of:
1) Once a yr
2) Quarterly
3) 24 times per yr
The base formula is really:
eʳ= (1+i) [For 1 yr] OR eʳ= (1+(iᵐ/m))ᵐ [Multiple yrs]
1) r= ln(1+i)
2) r= 4ln(1+(iᵐ/m))
3) r= 24ln(1+(iᵐ/m))
1)What is the annual compound discount rate?
2) What is the discount factor v?
1) d= i / (1+i)
2) v= 1 / (1+i)
Author
GoBroncos
ID
365766
Card Set
Question Types
Description
Updated
2024-09-16T16:49:29Z
Show Answers
Home
Flashcards
Preview