What Is the Effective Rate That Corresponds to a Nominal

question 148

Short Answer

What is the effective rate that corresponds to a nominal rate of 20% compounded quarterly?

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Definitions:

Discount Rate

The rate of interest utilized within discounted cash flow methodology to calculate the current market value of future cash flows.

Net Present Value

The calculation of the current value of a series of future cash flows generated by an investment minus the initial capital cost.

Present Value

The current value of a future sum of money or stream of cash flows, given a specified rate of return.

Immediate Cash Outflow

Expenditures or payments that require immediate disbursement of cash from a business.