Posted by **Ashton** on Tuesday, November 27, 2012 at 3:35pm.

Find the effective rate corresponding to the given nominal rate. (Round your answer to the nearest hundredth of a percentage point.)

(a) 7%/year, compounded daily

%

(b) 6%/year, compounded monthly

%

- math -
**angela**, Tuesday, November 27, 2012 at 4:02pm
(1+r)^365 =(1.07)

1+r = 1.07^1/365

1+r =1.00018538

r = 0.0018538

r = .185% daily

(1+r)^12 = 1.06

1+r = (1.06)^1/12

1+r = 1.004867551

r = 0.004867551

r = .486% monthly

- math -
**Reiny**, Tuesday, November 27, 2012 at 5:17pm
I disagree with angela's answer

When they ask for the effective rate, they are asking for the annual rate which is equivalent to the given compounded rate . This effective rate is often called APR

7% compounded dails

i = .07/365 = .00019178

let the effective rate be r

1+r = 1.00019178)^365

1+r = 1.0725

r = .0725

the effective rate is 7.25%

for the 2nd ...

i = .06/12 = .005

1+r = 1.005^12 = 1.06168

r = .06168 or appr 6.168%

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