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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
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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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