Nominal and effective interest rates
Chapter 8G
Chapter 8G
Understand how to compare the annual interest between loans advertising different compounding terms
convert interest rates to a common base by applying effective interest rate formula.
determine the best interest rate by performing a consistent comparison
Recurrence relation for compound interest Vn+1 = RVn for R > 1
Apply recurrence rule for compound interest
nominal interest rate
effective interest rate
compounding period per year
comparison
8G - 1, 2, 3, 4, 5, 6, 7