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Finite Math

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Find the effective rate of interest corresponding to a nominal rate of 6%/year compounded annually, semiannually, quarterly, and monthly. (Round your answers to two decimal places.)

  • Finite Math -

    Do it the same way I just showed you in your previous post

    Same type of question.

  • Finite Math -

    Just saw your other post.
    What don't you understand?

    I will do the quarterly rate problem.

    Let the effective annual rate be i
    so the interest factor will be (1+i)^1 for one year
    (you should know the (1+i)^n part)

    you want this to be equal to a rate of 6% per annum compounded quarterly , or
    a rate of .06/4 or .015 per quarter, with n = 4

    so (1+i)^1 = (1+.015)^4
    1+i = 1.015^4
    1+i = 1.06136551
    i = .06136551
    you wanted 2 decimals, so
    the effective annual rate is 6.14 %

    see if you can the others the same way.

  • Finite Math -

    Okay i think i understand.

    annually: 6%
    semiannually: 6.09%
    quarterly: 6.14%
    monthly: 6.17%

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