Problem 4-100 (algorithmic) E Question Hel Find the interest rates in the follow

Question

Problem 4-100 (algorithmic) E Question Hel Find the interest rates in the following situations. a. APR: 7%, compounded monthly. Find the effective annual interest rate. b. Nominal rate is 9% compounded quarterly. Find the effective semi-annual rate. C. The effective annual interest rate is 15.36% and compounding is monthly. Find the nominal interest rate. d-r-6% and compounding is monthly. Find the effective quarterly interest rate. a. The effective annual interest rate is 1 %. (Round to one decimal place.) Enter your answer in the answer box and then click Check Answer. parts remaining Clear All

Explanation / Answer

A.

Effective annual interest rate = (1 + 7%/12)^12 – 1

Effective annual interest rate = 7.2%

B.

Quarterly nominal rate = 9%/4 = 2.25%

Effective semiannual interest rate = 1.0225*1.0225 – 1 = 4.55% or 4.6%

C.

Let, nominal rate = R

15.36% = (1+R/12)^12 – 1

1.1536 = (1+R/12)^12

1.01197^12 = (1+R/12)^12

R = 12*.01197

R = 14.37% or 14.4%

D.

Monthly nominal interest rate = 6%/12 = .5%

So,

Effective quarterly interest rate = (1+.5%)^3 - 1 = 1.51% or 1.5%

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.