Compute the effective annual interest rate

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Reference no: EM131505697

Question: 1. An outright purchase of $20,000 now (a lumpsum payment) can be traded for 24 equal payments of $941.47 per month, starting one month from now. What is the monthly interest rate that establishes equivalence between these two payment plans?

2. Compute the effective annual interest rate in each of the following situations.

a. 5.75% nominal interest, compounded quarterly.

b. 5.75% nominal interest, compounded daily.

Reference no: EM131505697

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