Identify the compounding period for the following interest statements: ( a ) 3% per quarter; ( b ) 10% per year, compounded semiannually; ( c ) nominal 7.2% per year, compounded monthly; ( d ) effective 3.4% per quarter, compounded weekly; and ( e ) 2% per month, compounded continuously

A) 3% per quarter As the rate is expresses as quarterly there are no subperiods.

b) 10% per year, compounded semiannually 2 period per cycle

c) nominal 7.2% per year, compounded monthly;

12 period per cycle

d ) effective 3.4% per quarter, compounded weekly

12 periods as we assume 4 weeks per month an a quarter has 3 months

( e ) 2% per month, compounded continuously

infinite periods as continuously compounding represent an hypothetical full use of compound capitalziation over a given period of time

Explanation:

Lower domestic interest rates should help to boost the economy, by increasing lending and investment. It also should depreciate the currency of the country, increasing exports and decreasing imports. This temporary depreciation of the currency should be offset in the short run, as more exports will eventually result in an appreciation. Foreign direct investment should also increase (at least temporarily) due to cheaper currency.