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PART 3 Valuation of Future Cash Flows In this case, we know the EAR is 18 percent, and compounding. Let $q$ stand for the quoted rate. We EAR $= [1 + (\text{Quoted rate}/m)]^m - 1$ $.18 = [1 + (q/12)]^{12} - 1$ $1.18 = [1 + (q/12)]^{12}$ We need to solve this equation for the quoted rate. we did to find an unknown interest rate in Chapter $1.18^{(1/12)} = 1 + (q/12)$ $1.18^{0.08333} = 1 + (q/12)$ $1.0139 = 1 + (q/12)$

          PART 3
Valuation of Future Cash Flows
In this case, we know the EAR is 18 percent, and
compounding. Let $q$ stand for the quoted rate. We
EAR $= [1 + (\text{Quoted rate}/m)]^m - 1$
$.18 = [1 + (q/12)]^{12} - 1$
$1.18 = [1 + (q/12)]^{12}$
We need to solve this equation for the quoted rate.
we did to find an unknown interest rate in Chapter
$1.18^{(1/12)} = 1 + (q/12)$
$1.18^{0.08333} = 1 + (q/12)$
$1.0139 = 1 + (q/12)$

PART 3
Valuation of Future Cash Flows
In this case, we know the EAR is 18 percent, and
compounding. Let q stand for the quoted rate. We
EAR = [1 + (Quoted rate/m)]^m - 1
.18 = [1 + (q/12)]^12 - 1
1.18 = [1 + (q/12)]^12
We need to solve this equation for the quoted rate.
we did to find an unknown interest rate in Chapter
1.18^(1/12) = 1 + (q/12)
1.18^0.08333 = 1 + (q/12)
1.0139 = 1 + (q/12)

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A Graphical Approach to College Algebra

John Hornsby,Margaret L. Lial,Gary… 6th Edition

Chapter 5

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Valuation of Future Cash Flows In this case, we know the EAR is 18 percent, a compounding. Let q stand for the quoted rate. We have: EAR = [1 + (Quoted rate/m)]^m - 1 0.18 = [1 + q/12]^12 - 1 1.18 = [1 + q/12]^12 We need to solve this equation for the quoted rate, as we did to find an unknown interest rate in Chapter 1. 1.18(1/12) = 1 + q/12 1.0139 = 1 + q/12