Time Value of Money(英文版)(ppt 68頁)

Time Value of Money(英文版)內容提要：
Effective Annual Rate (EAR = EFF%):
The annual rate that causes PV to grow to the same FV as under multi-period compounding.
Example: EFF% for 10%, semiannual:
FV = (1 + iNom/m)m = (1.05)2 = 1.1025.
EFF% = 10.25% because
(1.1025)1 = 1.1025.
Any PV would grow to same FV at 10.25% annually or 10% semiannually.
An investment with monthly payments is different from one with quarterly payments. Must put on EFF% basis to compare rates of return. Use EFF% only for comparisons.
Banks say “interest paid daily.” Same as compounded daily.

..............................