A company that makes modular bevel gear drives with a tight swing ratio for optimizing fork-lift vehicles was told that the interest rate on a loan would be an effective 3.5% per quarter, compounded monthly. The owner, confused by the terminology, asked you to help. What is the (a) APR, and (b) APY? (c) Explain how the EFFECT and NOMINAL functions can or cannot be used to find the APR and APY.
What will be an ideal response?
(a) First find effective monthly rate; then find APR with m = 3 months/quarter
0.035 = (1 + r/3)3 – 1
r/3 = (1 + 0.035)1/3 – 1
= 1.153% per month
APR = 1.153*12
= 13.8% per year
(b) APY = (1 + 0.138/12)12 - 1
= 14.71%
(c) = EFFECT(13.8%,12) displays the APY of 14.71% per year.
The NOMINAL functions displays only annual nominal or APR rates. Therefore, the quoted effective 3.5% per quarter, compounded monthly can’t be entered to get the correct answer of 13.8%. The effective APY of 14.71% can be entered into = NOMINAL(14.71%,12) to display the APR of 13.8%, however.
You might also like to view...
?When creating a floor plan in CADD, start the design by drawing the ____.
A. ?doors B. ?windows C. ?walls D. ?foundation
The objective of the establishment stage of micropropagation is to obtain ________ cultures that ________ to form a uniform number of elongated microshoots.
Fill in the blank(s) with the appropriate word(s).
Adult domestic cats have 30 teeth (16 upper and 14 lower)
A. True B. False
A list of missing or damaged construction items or construction elements that were built improperly is known as __________________________
A. a construction exception list B. a punch list C. a warranty list D. Both A and C