Which of the following combinations of interest rate and number of periods is needed for calculation of the present value of an investment that involves an annual interest rate of 12% for three years with monthly compounding? Number of periods Interest rate

Question

Quizplus · Accepted Answer

For monthly compounding, the annual interest rate is divided by the number of months in a year (12) to get the monthly interest rate, and the number of periods is the number of years times 12. Therefore, for a 12% annual rate over 3 years, the monthly rate is 1% (12%/12), and the number of periods is 36 (3*12).

Which of the Following Combinations of Interest Rate and Number