How to find nominal annual rate of interest/discount?
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1) at what nominal annual rate of interest, convertible four times a year will you quadruple your investment in $15$ years?
2) the annual nominal rate of interest compounded quarterly is $i^(4) = 0.08$. what is $d^(2)$, the equivalent nominal annual rate of discount compounded semiannually?
Sorry in advance, these are homework problems that I just can't get the right answers. for $1)$ I did $(1+i)^4*15 = 4$ and get $i=0.023$, then did $(1+0.023)^4-1 = 0.0968$ but this is not the right answer. Also for $2)$ what I've done is since we know $1-d = frac11+i$, $(1+frac0.084)^2 - 1 = 0.0404$ then i found $d$ to be $0.0388$ both wrong. How do i get the right interest/discount?
finance
asked Feb 16 '17 at 17:56
Allie
794319
add a comment |Â
up vote
1
down vote
favorite
1) at what nominal annual rate of interest, convertible four times a year will you quadruple your investment in $15$ years?
2) the annual nominal rate of interest compounded quarterly is $i^(4) = 0.08$. what is $d^(2)$, the equivalent nominal annual rate of discount compounded semiannually?
Sorry in advance, these are homework problems that I just can't get the right answers. for $1)$ I did $(1+i)^4*15 = 4$ and get $i=0.023$, then did $(1+0.023)^4-1 = 0.0968$ but this is not the right answer. Also for $2)$ what I've done is since we know $1-d = frac11+i$, $(1+frac0.084)^2 - 1 = 0.0404$ then i found $d$ to be $0.0388$ both wrong. How do i get the right interest/discount?
finance
asked Feb 16 '17 at 17:56
Allie
794319
What is the answer for 1)? Are you close so it might be a convention thing?
– spaceisdarkgreen
Feb 16 '17 at 18:01
@spaceisdarkgreen i do not know the answer for either one
– Allie
Feb 16 '17 at 18:02
Reading the definition of nominal interest rate on wikipedia, I suspect that instead of doing $(1+.023)^4-1$ you should just do $.023*4=.0935$
– spaceisdarkgreen
Feb 16 '17 at 18:04
add a comment |Â
up vote
1
down vote
favorite
up vote
1
down vote
favorite
1) at what nominal annual rate of interest, convertible four times a year will you quadruple your investment in $15$ years?
2) the annual nominal rate of interest compounded quarterly is $i^(4) = 0.08$. what is $d^(2)$, the equivalent nominal annual rate of discount compounded semiannually?
Sorry in advance, these are homework problems that I just can't get the right answers. for $1)$ I did $(1+i)^4*15 = 4$ and get $i=0.023$, then did $(1+0.023)^4-1 = 0.0968$ but this is not the right answer. Also for $2)$ what I've done is since we know $1-d = frac11+i$, $(1+frac0.084)^2 - 1 = 0.0404$ then i found $d$ to be $0.0388$ both wrong. How do i get the right interest/discount?
finance
asked Feb 16 '17 at 17:56
Allie
794319
1) at what nominal annual rate of interest, convertible four times a year will you quadruple your investment in $15$ years?
2) the annual nominal rate of interest compounded quarterly is $i^(4) = 0.08$. what is $d^(2)$, the equivalent nominal annual rate of discount compounded semiannually?
Sorry in advance, these are homework problems that I just can't get the right answers. for $1)$ I did $(1+i)^4*15 = 4$ and get $i=0.023$, then did $(1+0.023)^4-1 = 0.0968$ but this is not the right answer. Also for $2)$ what I've done is since we know $1-d = frac11+i$, $(1+frac0.084)^2 - 1 = 0.0404$ then i found $d$ to be $0.0388$ both wrong. How do i get the right interest/discount?
finance
finance
asked Feb 16 '17 at 17:56
Allie
794319
asked Feb 16 '17 at 17:56
Allie
794319
asked Feb 16 '17 at 17:56
Allie
794319
asked Feb 16 '17 at 17:56
Allie
794319
asked Feb 16 '17 at 17:56
Allie
794319
794319
What is the answer for 1)? Are you close so it might be a convention thing?
– spaceisdarkgreen
Feb 16 '17 at 18:01
@spaceisdarkgreen i do not know the answer for either one
– Allie
Feb 16 '17 at 18:02
Reading the definition of nominal interest rate on wikipedia, I suspect that instead of doing $(1+.023)^4-1$ you should just do $.023*4=.0935$
– spaceisdarkgreen
Feb 16 '17 at 18:04
add a comment |Â
What is the answer for 1)? Are you close so it might be a convention thing?
– spaceisdarkgreen
Feb 16 '17 at 18:01
@spaceisdarkgreen i do not know the answer for either one
– Allie
Feb 16 '17 at 18:02
Reading the definition of nominal interest rate on wikipedia, I suspect that instead of doing $(1+.023)^4-1$ you should just do $.023*4=.0935$
– spaceisdarkgreen
Feb 16 '17 at 18:04
What is the answer for 1)? Are you close so it might be a convention thing?
– spaceisdarkgreen
Feb 16 '17 at 18:01
What is the answer for 1)? Are you close so it might be a convention thing?
– spaceisdarkgreen
Feb 16 '17 at 18:01
@spaceisdarkgreen i do not know the answer for either one
– Allie
Feb 16 '17 at 18:02
@spaceisdarkgreen i do not know the answer for either one
– Allie
Feb 16 '17 at 18:02
Reading the definition of nominal interest rate on wikipedia, I suspect that instead of doing $(1+.023)^4-1$ you should just do $.023*4=.0935$
– spaceisdarkgreen
Feb 16 '17 at 18:04
Reading the definition of nominal interest rate on wikipedia, I suspect that instead of doing $(1+.023)^4-1$ you should just do $.023*4=.0935$
– spaceisdarkgreen
Feb 16 '17 at 18:04
add a comment |Â
1 Answer
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votes
up vote
0
down vote
Nominal annual interest rate is defined to be the simple interest rate for a compounding period times the number of compounding periods in a year.
So, for the first one, you correctly get the quarterly interest rate of $i=0.023$ and the answer should just be four times that
For the second, I think you did everything right except you need to double the $d=0.0388,$ since they want the nominal annual discount whereas you computed the semiannual discount.
answered Feb 16 '17 at 18:21
spaceisdarkgreen
29.1k21549
add a comment |Â
1 Answer
1
active
oldest
votes
1 Answer
1
active
oldest
votes
active
oldest
votes
active
oldest
votes
up vote
0
down vote
Nominal annual interest rate is defined to be the simple interest rate for a compounding period times the number of compounding periods in a year.
So, for the first one, you correctly get the quarterly interest rate of $i=0.023$ and the answer should just be four times that
For the second, I think you did everything right except you need to double the $d=0.0388,$ since they want the nominal annual discount whereas you computed the semiannual discount.
answered Feb 16 '17 at 18:21
spaceisdarkgreen
29.1k21549
add a comment |Â
up vote
0
down vote
Nominal annual interest rate is defined to be the simple interest rate for a compounding period times the number of compounding periods in a year.
So, for the first one, you correctly get the quarterly interest rate of $i=0.023$ and the answer should just be four times that
For the second, I think you did everything right except you need to double the $d=0.0388,$ since they want the nominal annual discount whereas you computed the semiannual discount.
answered Feb 16 '17 at 18:21
spaceisdarkgreen
29.1k21549
add a comment |Â
up vote
0
down vote
up vote
0
down vote
Nominal annual interest rate is defined to be the simple interest rate for a compounding period times the number of compounding periods in a year.
So, for the first one, you correctly get the quarterly interest rate of $i=0.023$ and the answer should just be four times that
For the second, I think you did everything right except you need to double the $d=0.0388,$ since they want the nominal annual discount whereas you computed the semiannual discount.
answered Feb 16 '17 at 18:21
spaceisdarkgreen
29.1k21549
Nominal annual interest rate is defined to be the simple interest rate for a compounding period times the number of compounding periods in a year.
So, for the first one, you correctly get the quarterly interest rate of $i=0.023$ and the answer should just be four times that
For the second, I think you did everything right except you need to double the $d=0.0388,$ since they want the nominal annual discount whereas you computed the semiannual discount.
answered Feb 16 '17 at 18:21
spaceisdarkgreen
29.1k21549
answered Feb 16 '17 at 18:21
spaceisdarkgreen
29.1k21549
answered Feb 16 '17 at 18:21
spaceisdarkgreen
29.1k21549
answered Feb 16 '17 at 18:21
spaceisdarkgreen
29.1k21549
29.1k21549
add a comment |Â
add a comment |Â
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What is the answer for 1)? Are you close so it might be a convention thing?
– spaceisdarkgreen
Feb 16 '17 at 18:01
@spaceisdarkgreen i do not know the answer for either one
– Allie
Feb 16 '17 at 18:02
Reading the definition of nominal interest rate on wikipedia, I suspect that instead of doing $(1+.023)^4-1$ you should just do $.023*4=.0935$
– spaceisdarkgreen
Feb 16 '17 at 18:04