Summary
The formulas in Chapter 5 are appropriate for most typical business decisions. This chapter explained some less-common situations that you also need to be able to work with. This chapter covered the following major topics:
Converting between nominal and effective interest rates to address arbitrary interest periods and compounding frequencies.
Handling cash flows at frequencies longer, equal to, or shorter than the interest-compounding period.
Formulas for working with continuous compounding of interest.
Determining actual interest rates when all the other factors are known but the interest rate, i, is not.
Calculating loan-payoff amounts and computing the effect of increasing the amount paid on each loan payment.
Separating principal and ...
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