Activity Overview
In this activity, students use the effective annual rate calculation to compare the nominal rates of various financial instruments.
Before the Activity
Select TVM Solver from the calculator menu
See the attached PDF file for detailed instructions for this activity
Print page 13-14 from the attached PDF file for your class
During the Activity
Distribute the pages to the class.
Follow the Activity procedures:
Calculate the effective rate using the nominal interest rate and the number of compounding periods per year
Use the effective rate calculation to compare the yield for simple interest earnings versus compound interest earnings
Calculate the nominal interest rate given the effective rate and the number of compounding periods per year
After the Activity
Review student results:
As a class, discuss questions that appeared to be more challenging
Re-teach concepts as necessary