Time Value of Money

Compounded quarterly? Compounded monthly? Compounded daily? Answer: The effective annual rate is the annual rate that causes the PV to grow to the same FV as under multi-period compounding. For 12 percent semiannual compounding, the ear is 12.36 percent: EAR = Effective Annual Rate = IF iNom = 12% and interest is compounded semiannually, then: ................
................