- This topic has 1 reply, 2 voices, and was last updated 2 years ago by
.
- Posts
hello
so i have been trying to solve these questions in which you have to convert from nominal interest rate to effective annual interest rate but i dont seem the get the hang of it
i do understand that the effective rates are compounded but i still am not able to solve it
i tried using the formula (1+r/no. of times compounded) ^(12/no. of times compounded) the entire thing minus 1
can you please help me
for reference you can find these type of questions in the investment appraisal chapter of bpp kitThe formula you quote is not correct. It is to the power (number of times compounded) and not 12/number of times compounded.
Have you watched my free lectures on interest? The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
- You must be logged in to reply to this topic.