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Module 2 Problem Set 1 Part A
• Due on 27 Mar, 2020 11:59:00
• Asked On 26 Mar, 2020 09:41:15
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Module 2 Problem Set 1 Part A

Complete the short answer questions below.

1. What is the periodic rate if the nominal rate is 9.25% compounded monthly?

2.  Explain the difference between discounting and compounding.

3. Define a perpetuity? In your definition explain what makes it different from an annuity.

4. What is the periodic rate of a 16% nominal rate with quarterly compounding?

5. For what compounding period is the nominal rate equal to the periodic rate and equal to the effective rate?

6. If the periodic rate is 10% and the compounding period is semiannual, what is the nominal rate?

7. Describe the difference between an annuity due and an ordinary annuity.

8. Describe the two circumstances in which an effective rate is used.

9.  When do you use the payment key, PMT, versus the uneven cash flow key?

10. Assume you invested money today at 6% compounded monthly. If you set  P_YR =1 on your calculator, then N (number of periods) =_____ and the interest rate that sits on the timeline and enters into the calculator as I/YR =_____?

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PROBLEM SET 1 • • A good capital budgeting decision is one in which the benefits are worth more to the firm than the cost of ...
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Explanation: 1. What is the periodic rate if the nominal rate is 9.25% compounded monthly? Answer: Compounded monthly means 12 periods. So, periodic rate = Nom...
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Module 2 Problem Set 1 Part A Complete the short answer questions below. 1. What is the periodic rate if the nominal rate is 9.25% compounded monthly? 2. Explain the difference between discounting and compounding. 3. Define a perpetuity? In your definition...
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