Nominal versus effective rates

Reference no: EM1346898

a) Explain why the sign we use for present value or future value variables is important when we use Excel or a financial calculator to solve time value of money problems? Also explain how it work (i.e., tackle the "how" as well as "why).

b) True or False - Nominal versus effective rates. Let's make sure we all understand this concept by indicating whether the question below is true or false. Then support your reasoning.

An investment vehicle that compounds more frequently than once per year will always result in an effective rate that is higher than the nominal rate

Reference no: EM1346898

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