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Lecture
4
Engineering Economics ENGR 3300
Department of Mechanical EngineeringInter American University of Puerto Rico
Bayamon CampusDr. Omar E. Meza Castillo
[email protected]://www.facultad/bayamon.inter.edu/omeza
Lecture
4Nominal and Effective
Interest Rate
What it really means?
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Understanding Money Management
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Nominal Versus Effective Interest Rates
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18% APR Compounded Monthly
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18% APR Compounded Monthly
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Effective Annual Interest Rate
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What It Really Means
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Practice Problem 1
If your credit card charges the interest based on 12.5% APR, what is your monthly interest rate and annual effective interest rate, respectively?
Your current outstanding balance is $2,000 and you skip payments for 2 months. What would be the total balance 2 months from now?
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Practice Problem 2
Suppose your savings account pays 9% interest compounded quarterly. If you deposit $10,000 for one year, how much would you have?
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Effective Annual Interest Rates (9% compounded quarterly)
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Nominal and Effective Interest rates with Different
Compounding periods
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Homework 2 www.bc.inter.edu/facultad/omeza
