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interest

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › interest

  • This topic has 5 replies, 2 voices, and was last updated 5 years ago by John Moffat.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • September 6, 2019 at 10:29 am #545245
    iza1
    Participant
    • Topics: 115
    • Replies: 112
    • ☆☆☆

    hi
    if nominal interest is compounded weekly as 2% what is apr ?

    r = 2/52 weeks =0.038 %

    1 + R = (1 +.00038 )^52
    R = 1. 99%
    is this right ??

    September 6, 2019 at 3:55 pm #545306
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    No it is not right.

    2/52 = 0.038 (not 0.038%)

    Therefore 1 + R = (1 + 0.038)^52

    September 7, 2019 at 7:40 am #545401
    iza1
    Participant
    • Topics: 115
    • Replies: 112
    • ☆☆☆

    but 2 is in % right ?
    so when we divide it is .02/52

    What is the effective annual rate of interest of 2.1% that is compounded every 3 months?

    Also in this question then it must be
    r = 2.1/4 =.525
    1+R = 1.525^ 4
    R= 4.408

    but answer says 8.67

    September 7, 2019 at 9:21 am #545414
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    2% is the same as 0.02, not 0.02%.

    What I wrote before is correct.

    Do watch my free lectures on interest 🙂

    September 7, 2019 at 9:38 am #545418
    iza1
    Participant
    • Topics: 115
    • Replies: 112
    • ☆☆☆

    i did sir. i cant seem to understand the nominal to effective rate
    nominal rate is when interest rate is expressed annually but calculated less than a year right

    What is the effective annual rate of interest of 2.1% that is compounded every 3 months?

    Also in this question then it must be
    r = 2.1/4 =.525
    1+R = 1.525^ 4
    R= 4.408

    but answer says 8.67

    September 7, 2019 at 3:25 pm #545469
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    If the interest is 2.1% charged every three months, then 1 + R = 1.021^4

    Again, have you watched my free lectures on interest?

  • Author
    Posts
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