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 - Reiny, Friday, May 6, 2011 at 5:18pm
Do it the same way I just showed you in your previous post
Same type of question.
Finite Math - Reiny, Friday, May 6, 2011 at 5:55pm
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 - Dee, Friday, May 6, 2011 at 9:04pm
Okay i think i understand.