Answer to Question #118335 in Financial Math for Artika Archana

Question

if one compound interest rate is 12% per annum compounding monthly and another interest rate is 12% per annum compounding weekly. what is the interest rate per period in each case, how many periods per year is there for each type of interest rate and how many periods will there be for 5 years?

Answer 1

1st case.

interest rate per period: $\frac{0.12}{12}=0.01=1\%;$

number of periods per year: 12;

number of periods for 5 years: $12*5=60.$

2nd case.

interest rate per period: $\frac{0.12}{52}=0.0023=0.23\%;$

number of periods per year: 52;

number of periods for 5 years: $52*5=260.$