Effective and Nominal Rate Homework Help
Effective Vs nominal rate assignment help: Great support to complete assignments timely
Nowadays, education has become more stressful. Students have to do several tasks at the same time. In such a situation, our effective Vs nominal rate assignment help service provides a great relief to the students of financial accounting. Financial accounting includes huge numbers of topics, both theoretical and mathematical. Therefore, the students have to give complete focus on the subject to understand each and every concept clearly. Interest calculation sounds simple, but there are lots of things to understand in this topic.
Effective interest rate Vs Nominal interest rate
There are various types of interest rates which differ from each other on the basis of several key economic factors. Being a student of accounting, it is important for you to know about the factors which differentiate various interest types so that they can do their accounting job more smartly in future.
Our experts for effective and nominal rate homework help first try to explain all the interest types in details to the students.
• Effective interest rate
Effective interest rate considers the power of compounding into account. For instance, an investor has to receive 6% interest for investing $1, 000 on an annual basis. If the interest in compounded on semi-annual basis then the investor will get an interest $30 after the first 6 months and $30.90 of interest for the second six months. After one year, the investor will receive $60.90 as an interest.
• Nominal interest rate
The nominal interest rate, one of the simplest interest rates, is an interest rate on a given bond or loan. Such interest rate is also called the coupon rate for fixed income investments. The issuer gives assurance to the investors with a stamp on the coupons which bondholder can redeem later on.
Basically, the nominal interest rate is the original value for the money that a borrower repays to its lender for using their capital. Suppose, the nominal interest rate on a loan is 6%. In such a scenario, a borrower is likely to pay $60 of interest for each $1000.
If you compare two interest rates, you will find that nominal rate is 6% only but effective rate is 6.09%.
Thus we can say that the difference between the two interest types increases as the number of compounding periods increase within a given time.
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