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EFFECTIVE ANNUAL RATE OF INTREST: is the intrest rate converted from years to short time frame of months/ days?
NORMINAL RATE OF INTREST: Is the intrest rate converted from months/days to longer time frame of years?
NPV FACTOR:Is the intrest rate without the profit amount (principle) so as to find the how much invenstment was put into a business in order to pay for the cost of capital?
Sir,please help.The effective annual rate is the annual (yearly) rate. If you are given (for example) the monthly rate, then if we convert it to a yearly rate we have the annual effective rate.
The nominal rate is the yearly rate expressed without compounding.
There is no such term as ‘NPV factor’ and so I don’t understand at all what you are asking.
Have you watched my free lectures on interest and on investment appraisal?
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