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Pre-calc

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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

  • Pre-calc - ,

    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)

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