Question

A bank is currently offering a savings account paying an interest rate of 9.10 percent compounded quarterly. It would like to offer another account, with the same effective annual rate, but compounded monthly.

What is the equivalent rate compounded monthly?

Equivalent rate ______%

Answer 1

Cinen: nominal rate for quarterly compounding = 9.10% Effective annual sale (1 tahun ror nominal rate for quarterly compounding number of compounding in lyear. effective annual rate : ( 1+9.10%) = (1+0.02275) "-, (1.02275 )", -1 1.094153-1 effective annual rate = 0.094153 OR 9.4153% So, using this effective rate we need to find nominal rate for monthly compounding cusing same formula effective annual rate= (1+ kom 3n-1 roma rate for monthly compounding (nominal) n = number of compounding in I year. Effective annual rate = (1+xm. 2 - 1 12

9.4153% -) 12 12 1.094153 = + L (1.094153) 12 It 12 1.007527 – 1 = 12 مو 0.007527= 12 0.090319 9.0319% ompanion firstly we we can calculate the effective annual Interest rate by quarterly nominal hate. And to find the nominal monthly compoundin rate for some affective rate we can use the same fornita and use the calculated effective rate