Posted by **Dee** on Friday, May 6, 2011 at 5:09pm.

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

http://www.jiskha.com/display.cgi?id=1304715894

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.

annually: 6%

semiannually: 6.09%

quarterly: 6.14%

monthly: 6.17%

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