ACTSC231 Lecture Notes - Lecture 2: Annual Effective Discount Rate, Effective Interest Rate, Nominal Interest Rate
Document Summary
Note: questions with an "exercise" reference at the beginning have been obtained from the course textbook. We still need to complete the section on nominal rates. A payment of at each of times 1, 4, 7 and 10. A payment of at each of times 4 and 8. Given a simple discount rate of 5%, (a) what is the equivalent simple interest rate? (b) what is the equivalent annual compound interest rate? (remember that we are looking for equivalence only over a period of 3 years. Always ask yourself first what is meant by "equivalence" over some given period. : you have a liability of due in 15 years. Invest today at a simple discount rate of 2% Invest today at a simple interest rate of 2. 1% Invest today at a nominal interest rate of 1. 4% compounded monthly: kenny investwell puts today into an account and will invest another in 5 years.