CIVILEN 3080 Lecture Notes - Lecture 3: Discounted Cash Flow, Risk Premium, Extended Periodic Table

• School: Ohio State University
• Department: Civil Engineering
• Course: CIVILEN 3080
• Professor: Bielicki Jeff

Document Summary

Nominal interest rate rate quoted based on an annual period. Effective interest rate annual interest earned or paid in a year or some other time period. 18% nominal interest rate annual percentage rate (apr) Interest rate per month (i) = 18%/12 = 1. 5% Number of interest periods per year (n) = 12. If you borrowed money, the bank will charge 1. 5% interest each month on your unpaid balance. If you deposited money, you will earn 1. 5% interest each month on your remaining balance. Effective annual interest rate (yield) ia = (1+ r/m)n 1 r = nominal interest rate per year ia = effective annual interest rate. M = number of interest periods per year ia = (1 + 0. 18/12)12 1 = 19. 56% Remember, ron earned 0. 10% per month on the balance in his bank account. Nominal interest rate/annual percentage rate = 0. 001 * 12 = 1. 2% per year.