A18 Nominal Annual Rates of Discount Flashcards
1
Q
what is the meaning of d^m intuitively?
A
NAR of discount convertible m times per year
2
Q
what is the meaning of d^m/m intuitively?
A
effect rate of discount per m-th of a year
3
Q
what’s d^m in terms of d?
A
d^m = m[1 - (1 - d)^1/m]
4
Q
what is the relationship b/w d^m and d^n?
A
d^n = n[1 - (1 - d^m/m)^m/n]
5
Q
converting b/w i^n and d^m. how?
A
(1 + i^n/n)^n = (1 - d^m/m)^-m
6
Q
what is the discount factor for the 1/mth
of a year?
A
(1 - d^m/m)^-1
7
Q
what the annual accumulation factor for d^m?
A
d^m = (1 - d^m/m)^-m
