A Semiannually Compounded Nominal Rate and a Monthly Compounded Nominal

question 160

Essay

A semiannually compounded nominal rate and a monthly compounded nominal rate have the same effective rate. Which has the larger nominal rate? Explain.

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Definitions:

Compensation Expense

The total amount of cash and non-cash payments that businesses must make to employees, including salaries, bonuses, and benefits.

Paid-in Capital

The total amount of cash and other assets received from shareholders in exchange for stock, including amounts above the nominal value (or par value) of the shares.

Historical Cost Principle

An accounting principle that states assets should be recorded and reported at their original purchase price.

FASB's Proposal

A suggested change or addition to accounting standards published by the Financial Accounting Standards Board.