# Finite Math

posted by Dee

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.)

1. Reiny

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.

2. Reiny

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.

3. Dee

Okay i think i understand.

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

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