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Math Help - Can anyone help me with this?

  1. #1
    Newbie
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    Oct 2009
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    Can anyone help me with this?

    Here's the problem:

    What nominal rate compounded monthly has the same Annual Percentage Yield as 7% compounded quarterly?


    How would I go about solving this?
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  2. #2
    MHF Contributor
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    Aug 2007
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    i = Annual Nominal Rate to be compounded monthly

    The description of 7% is inadequate. Is that 7% quarterly or 7% Nominal Annual to be compounded quarterly? Let's go with the latter and we are nearly done.

    j = i/12 = Monthly interest rate

    k = 0.07/4 = Quarterly interest rate for 7%

    Solve for j

    (1+j)^{12}\;=\;(1+k)^{4}

    Solve for i.
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