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.
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Effective/Norminal Rates and NPV
9y ago#1The 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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