Nominal interest rate to effective interest rate

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Reference no: EM132000259

a) You are considering two different investments. The first option is an investment of $12,000, which pays $19,000 in five years. Alternatively, the second option allows you to invest the $12,000 in a term deposit with pays 9% per annum, compounded monthly, over the same period. Which is the preferred option?

b) Compare a compounding interest rate and a nominal interest rate to an effective interest rate.

Reference no: EM132000259

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