I get the fusion method for annuities with payments more frequent than interest period. but i dont get that why we use i(m) in the denominator?
I get that i(m) shows the nominal rate which needs to be compounded m times a year to get an effective rate of i.
But in fusion method thats not the case,
e.g find the PV of annuity immediate with monthly payments of 1/12 for 10 years at 5% effective par annum.
the question doesn't state the 5% is compounded monthly or was achieved by monthly compounding, but then when we take out the monthly effective rate, we assume monthly compounding as we use the formula m[(1+i)^1/m-1]
and even in BA II calculator the rate i punch in is simply [(1.005)^1/12]-1, i don't do any compounding or multiply this by 12, so why does the formula differ when i do it manually?