Question

PICWUIK. nomework 2 Score: 0.25 of 1 pt 16 of 16 (14 complete) %Problem 4-100 (book/static) Find the interest rates in the following situations. a. APR = 8%, compounded monthly. Find the effective annual interest rate. b. Nominal rate is 10% compounded quarterly. Find the effective semi-annual rate. c. The effective annual interest rate is 11.02% 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 8.3 %. (Round to one decimal place.) on b. The effective semi-annual rate is %. (Round to one decimal place.)

Answer 1

B. Nominal Rate = 10 % (Compounded Quarterly)

Effective Annual Interest Rate formula I = (1 + r/n)^ n - 1

= (1 + Interest rate / 4)^1*4 - 1

= (1 + 10%/4)^1*4 - 1

= (1.025)^4 - 1

= 0.103812890625 or (10.3812 %)

So semi annually effective rate = 10.3812 / 2 = 5.19 %