The nominal interest rate is the stated, or quoted, rate of interest. It is also known as the annual percentage rate (APR). Show
The effective interest rate is the actual rate of interest that you earn, or pay, over a period of time. It is also known as the effective yield (EY). When comparing two or more interest rates, the nominal interest rate is not useful because it does not take into account the effect of compounding. In order to make objective investment decisions regarding loan costs or investment returns over different compounding frequencies, the effective interest rate has to be determined. Recommended textbook solutions Intermediate Accounting14th EditionDonald E. Kieso, Jerry J. Weygandt, Terry D. Warfield 1,471 solutions
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What term is used to define a series of equal payments at equal time intervals?Definition of an Annuity
An annuity is a series of equal cash flows, or payments, made at regular intervals (e.g., monthly or annually). The payments must be equal, and the interval between payments must be regular.
Which of the following pays equal payments made at equal time periods to the investor?An annuity is a sequence of equal payments made at equal time periods. The value of an annuity is the sum of all deposits plus all interest paid.
Which of the following determines the current value of a regular series of equal payments occurring in the future quizlet?FV of a lump sum. Which of the following determines the current value of a regular series of equal payments occurring in the future? PV of an annuity.
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Which of the following refers to a series of equal payments or deposits quizlet?
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