Question

Periodic interest rates. In the following table, , fill in the periodic rates and the effective annual rates. First, fill in the periodic rates in the following table. (Round to two decimal places.) Compounding per Year Effective APR Period Periodic Rate Annual Rate Semiannual 7% 2 Data Table (Click on the following icon 9 in order to copy its contents into a spreadsheet.) Compounding per Year Effective Period APR Periodic Rate Annual Rate Semiannual 7% 2 Quarterly Monthly Daily 8% 4 6% 12 Enter your answer in the ansy 3.25% 365

Answer 1

Answer to Question 1:

Case 1:

Periodic Rate = APR / Compounding per Year
Periodic Rate = 7.00% / 2
Periodic Rate = 3.50%

Effective Annual Rate = (1 + Periodic Rate)^Compounding per Year - 1
Effective Annual Rate = (1 + 0.0350)^2 - 1
Effective Annual Rate = 1.0712 - 1
Effective Annual Rate = 0.0712 or 7.12%

Case 2:

Periodic Rate = APR / Compounding per Year
Periodic Rate = 8.00% / 4
Periodic Rate = 2.00%

Effective Annual Rate = (1 + Periodic Rate)^Compounding per Year - 1
Effective Annual Rate = (1 + 0.02)^4 - 1
Effective Annual Rate = 1.0824 - 1
Effective Annual Rate = 0.0824 or 8.24%

Case 3:

Periodic Rate = APR / Compounding per Year
Periodic Rate = 6.00% / 12
Periodic Rate = 0.50%

Effective Annual Rate = (1 + Periodic Rate)^Compounding per Year - 1
Effective Annual Rate = (1 + 0.005)^12 - 1
Effective Annual Rate = 1.0617 - 1
Effective Annual Rate = 0.0617 or 6.17%

Case 4:

Periodic Rate = APR / Compounding per Year
Periodic Rate = 3.25% / 365
Periodic Rate = 0.0089%

Effective Annual Rate = (1 + Periodic Rate)^Compounding per Year - 1
Effective Annual Rate = (1 + 0.000089)^365 - 1
Effective Annual Rate = 1.0330 - 1
Effective Annual Rate = 0.0330 or 3.30%

Answer to Question 2:

Periodic Rate = APR / Compounding per Year
Periodic Rate = 9.25% / 12
Periodic Rate = 0.77083%

Effective Annual Rate = (1 + Periodic Rate)^Compounding per Year - 1
Effective Annual Rate = (1 + 0.0077083)^12 - 1
Effective Annual Rate = 1.0965 - 1
Effective Annual Rate = 0.0965 or 9.65%