Question

What is multi-period compounding? How does it affect the annual rate of interest? Give an example

Answer 1

Answer:

Multi-period investments require a slightly more complex equation, where interest gets compounded based on the number of periods the investment spans. As a result of multiple periods, it is usually a good idea to calculate the average rate of return (cumulatively) over the lifetime of the investment.The periodic interest rate is the annual interest rate divided by the number of compounding periods. A greater number of compounding periods allows interest to be earned on or added to interest a greater number of times.

Explanation:

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Answer 2

Explanation:

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