1.Suppose bank 1 offers a stated annual rate of interest equal
to r1 compounded semiannually and bank 2 offers a stated annual
rate of interest equal to r2 compounded continuously. If r2 =
12.0307846 %, what would r1 have to be such that both banks are
offering the same annual effective rate of interest?
2. Would you rather receive $5,000 today or $10,000 in 12 years if the discount rate is 6.4 percent compounded semiannually? At what stated annual rate compounded semiannually would you be indifferent between the two alternatives?
2. Would you rather receive $5,000 today or $10,000 in 12 years if the discount rate is 6.4 percent compounded semiannually? At what stated annual rate compounded semiannually would you be indifferent between the two alternatives?
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