What is the significance of two nominal interest rates being equivalent?

Nominal Interest

The stated interest rate of a loan or investment, not accounting for inflation or compounding effects.

Equivalent

Something that is equal in value, function, or meaning to another in a specified context.

Analyze the equivalent interest rates among different compounding intervals.
Assess the repercussions of differing compounding periods on the effective interest rate.

Verified Answer

Final Answer :

If two nominal interest rates are equivalent, they will produce the same future value of an investment after one year.

Learning Objectives

Analyze the equivalent interest rates among different compounding intervals.
Assess the repercussions of differing compounding periods on the effective interest rate.