BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -In this case, the nominal annual interest rate is 10%, and the effective annual interest rate is also 10%. However, if compounding is more frequent than once per year, then the effective interest rate will be greater than 10%. The more often compounding occurs, the higher the effective interest rate.

Detailed explanation-2: -The interest rate can be compounded once or more per year. If the interest rate is compounded annually, it means the interest rate is compounded once per year. If the interest rate is compounded quarterly, then interest rate is compounded four times a year.

Detailed explanation-3: -The nominal interest rate is the periodic interest rate times the number of periods per year. For example, a nominal annual interest rate of 12% based on monthly compounding means a 1% interest rate per month (compounded).

Detailed explanation-4: -A = P (1 + r) t This formula helps us figure out how much interest we can earn on an investment over a certain period of time utilizing the multiple compounding period method. If we have $5, 000 invested at an annual rate of 8% for 10 years, we can easily calculate the total interest earned at the end of the term.

Detailed explanation-5: -To that end, annual percentage rate (APR) differs from the nominal rate, as it takes fees into account, and annual percentage yield (APY) takes both fees and compounding into account.