CHANGING INTEREST RATE PROBLEM
Trans-Star, a spin-off company of MOPAR, supplies major automobile transmission components to auto manufacturers worldwide and is Mopar’s largest supplier. A Trans-Star Engineer has been tasked with evaluating bids for new-generation CNC machinery to be directly linked to the automated manufacturing of high-precision transmission band components. The following are three interest rates that are included in the Vendor bids. Trans-Star will make payments on a semiannual basis only. The engineer is confused about the effective interest rates-what they are annually and over the payment period of 6-months. Answer the following questions:
Bid #1: 7.15% per year, compounded monthly
Bid #2: 8.53% per year, compounded quarterly
Bid #3: 2.66% per quarter, compounded quarterly
a) Calculate the effective semiannual interest rate for ALL three bids.
b) Calculate the effective annual interest rate for ALL three bids.
?WITHOUT USING EXCEL