Determine the effective annual rate with annual compounding

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Reference no: EM131338859

1. Given a nominal annual interest rate of 20 percent, determine the effective annual rate with
a. Annual compounding

b. Quarterly compounding

c. Monthly compounding

d. Continuous compounding

2. What is the future value of $1,000 invested for 10 years at a nominal interest rate of 10 percent compounded continuously? How much higher is this value than the value obtained with annual compounding for 10 years at 10 percent?

3. What is the present value of receiving $1,500 twenty-five years from now if the nominal interest rate is 10 percent, discounted continuously?

Reference no: EM131338859

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