Precalc
posted by Amy on .
Find the effective rate of interest for 5.25% compounded quarterly.
I don't know how to solve this.
Would I use this equation A=Pe^(rt)
But still I don't know because even if I put the given info into the equation I still need P and A

The quarterly interest is 5.25%/4=1.3125%.
Since interest is compounded quarterly, the total interest at the end of the year for an investment of 1000 is:
1000*1.013125^4
=1053.54
So the effective interest is
53.54/1000=5.354% (approximately)