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MBA, Ph.D in Management
Harvard university
Feb-1997 - Aug-2003
Professor
Strayer University
Jan-2007 - Present
Could you please explain in couple of sentences , example in your text and the difference between stated interest rate and market (effective) interest rate...
1. Discuss the distinction between the stated interest rate and the market or effective interest rate:
a. The stated interest rate is used to determine the periodic amount of cash interest paid.
b. The market or effective interest rate is used to value the bonds. This is the rate which is used to locate the factor in the present value tables.
2. The example in the text demonstrates valuation of bonds which pay interest annually.
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