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calc

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What rate of interest compounded quarterly will yield an effective interest rate of 8%?

  • calc - ,

    let the quarterly rate be i

    then (1+i)^4 = (1+.08)^1
    (1+i)^4= 1.08
    take 4th root of both sides

    1+i= 1.0194265..
    i = .019426..
    4i= .077706..

    So the annual rate compounded quartely is
    7.77% correct to 2 decimals

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