Compute the effective annual interest rate in each of these situations: (4.14)
a. 10 \% nominal interest, compounded semiannually.
b. 10 \% nominal interest compounded quarterly.
c. 10 \% nominal interest compounded weekly.
Question 4.T-Y-S.U: Compute the effective annual interest rate in each of these ...
\begin{gathered} \text { (a) } r=10 \%, M=2 / \mathrm{yr} ; i=\left[1+\frac{r}{M}\right]^{M}-1=\left[1+\frac{0.1}{2}\right]^{2}-1=0.1025=10.25 \% \\ \text { (b) } r=10 \%, M=4 / \mathrm{yr} ; i=\left[1+\frac{r}{M}\right]^{M}-1=\left[1+\frac{0.1}{4}\right]^{4}-1=0.1038=10.38 \% \\ \text { (c) } r=10 \%, M=52 / \mathrm{yr} ; i=\left[1+\frac{r}{M}\right]^{M}-1=\left[1+\frac{0.1}{52}\right]^{52}-1=0.1051 \\ =10.51 \%\end{gathered}
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