Question 1118759: Determine the effective rate for each of the following:
a. 19% compounded semi-annually
b. 19% compounded quarterly
c. 19% compounded bi- monthly
d. 19% compounded monthly
e. 19% compounded annually
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! 19% per year compounded annually is equal to 19/1 = 19% per year.
19% per year compounded semi-annually is equal to 19%/2 = 9.5% per semi-annual period.
19% compounded quarterly is equal to 19% / 4 = 4.75% per quarter.
19% compounded monthly is equal to 19% / 12 = 1.5833333333% per month.
19% compounded bi-monthly is determined by how bi-monthly is interpreted.
it can be interpreted as twice a month, or it can be interpreted as every 2 months.
both interpretations are, unfortunately, valid, according to the internet.
my own interpretation, however, takes into account that 2 payments per year would be semi-annual payments, not bi-annual payments.
therefore, i would assume bi-monthly means every 2 months, rather than twice a month, which would be interpreted as semi-monthly if you use the same logic as applied to semi-annually.
if bi-monthly is interpreted as twice a month, then the bi-monthly interest rate would be 19% 24 = .791666666667% per half month.
if bi-monthly is interpreted as every other month, then the bi-monthly interest rate would be 19% / 6 = 3.1666666667% per every 2 months.
i would go with every 2 months assumption, but do not really know what others would assume.
|
|
|
