The annual effective interest rate corresponds to the nominal rate of 10% compounded monthly Deal A: You
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Question:
The annual effective interest rate corresponds to the nominal rate of 10% compounded monthly
Deal A: You loan me $4000 today and I pay you back $2000 in 1 year, and $4000 in 2 years.
Deal B: I loan you $2000 today and another $4000 in 1 year and you pay me $X in 2 years.
What does $X have to be for you to be indifferent between these two deals?
Expert Answer:
To be indifferent between the two deals you need to receive the same effective annual return from bo... View the full answer
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