Identify the compounding period for the following interest statements: (a) 3% per quarter; (b) 10% per year, compounded semiannually; (c) nominal 7.2% per year, compounded monthly; (d) effective 3.4% per quarter, compounded weekly; and (e) 2% per month, compounded continuously

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26 September, 12:51

Identify the compounding period for the following interest statements: (a) 3% per quarter; (b) 10% per year, compounded semiannually; (c) nominal 7.2% per year, compounded monthly; (d) effective 3.4% per quarter, compounded weekly; and (e) 2% per month, compounded continuously

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Ellie Kent · Answer 1

A) 3% per quarter As the rate is expresses as quarterly there are no subperiods.

b) 10% per year, compounded semiannually 2 period per cycle

c) nominal 7.2% per year, compounded monthly;

12 period per cycle

d) effective 3.4% per quarter, compounded weekly

12 periods as we assume 4 weeks per month an a quarter has 3 months

(e) 2% per month, compounded continuously

infinite periods as continuously compounding represent an hypothetical full use of compound capitalziation over a given period of time