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18. Nonannual compounding period The number of compounding periods in one year is called compounding...

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18. Nonannual compounding period The number of compounding periods in one year is called compounding frequency. The compounding frequency attects both the present and future values of cash flows. An investor can invest money with a particular bank and earn a stated interest rate f 6.60%; however, interest will be compounded quarterly. What are the nominal, periodic, and effective interest rates for this investment opportunity? Interest Rates Nominal rate Periodic rate Effective annual rate You want to invest $24,000 and are looking for safe Investment options. Your bank is offering you a certificate of deposit that pays a nominal rate of 6% that is compounded quarterly. What is the effective rate of return that you will earn from this investment? 6.1366 06.04290 0 6.257% O 5,995 Suppose you dedde to deposit $24,000 in a savings account that pays a nominal rate of 125, but interest is compounded daily. Based on a 365 day year, how much would you have in the account after four months? (Hint: To calculate the number of days, divide the number of months by 12 and multiply by365) O $24.230.13 $25,653.85 $24,079.57 O 124,729,77

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