The two-year interest rate of 30 3⁄4% is equal to what nominal rate of interest convertible quarterly?
Hi
two year Effective interest rate EAR= 30 3/4 %
= 123/4 %
nominal quarterly rate = (1+EAR)^(1/n)-1
Here n = 8 since in 2 years, there are 8 quarters
nominal quarterly rate = (1+123/4%)^(1/8)-1
= 1.3075^(1/8)-1
= 0.034083
=3.41%
Thanks
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