Business, 15.02.2020 03:01 tifftiff22

Fund A earns interest at a nominal rate of 6% compounded monthly. Fund B earns interest at a nominal rate of discount compounded three times per year. The annual effective rates of interest earned by both funds are equivalent. Calculate the nominal rate of discount earned by Fund B.

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Answer from: lillianesagoff7411

6.045%

Explanation:

There are two forms of an interest rate: nominal interest rate and effective interest rate. The nominal interest rate does not take into account the compounding period while the effective interest rate does so it is a more accurate measure of interest charges.

The relationship between nominal annual rate (r) and effective annual interest rate (i) is:

i = [ 1 + (r ÷ m) ] ^ m – 1

And r = [ [ (i + 1) ^ (1 ÷ m) ] - 1 ] x m

where "m" is the number of compounding periods per year.

So for the fund A, i(A) = [ 1 + (6% ÷ 12) ] ^ 12 – 1 = 6.17% (m = 12 as the nominal rate of fund A is compounded monthly)

As the annual effective rates of interest earned by both funds are equivalent, i(A) = i(B) = 6.17%

rB= [ [ (iB + 1) ^ (1 ÷ 3) ] - 1 ] x 3 = [ [ (6.17% + 1) ^ ( 1 ÷ 3) ] - 1 ] x 3 = 6.045% (m=3 as the nominal rate of discount of fund B is compounded 3 times per year)

Answer from: Quest

1 all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know

Answer from: Quest

107x106 is the answer

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