Question

What is the corresponding annual effective interest rate equivalent to an effective annual discount rate of 5% p.a.?​

Answer 1

Answer:

• The terms and how they're calculated is very unclear to me. My understanding of "nominal" is that this is a rate which isn't in unit time. i.e. 5% per annum "is" in unit time (year) but 5% nominal would be some other time unit(say every 4 months, 6 months etc).

• Convertible rates, I don't know, I don't see a clear distinction with the said "nominal" rate. As often it is in financial context, perhaps it's the language that makes it vague.

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