math

posted by .

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 -

    (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 -

    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%

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. math & finance

    A bank offers a rate of 5.3% compounded semi-annually on its four year GICs(Guaranteed Investment Certificates). What monthly and annually compounded rates should it quote in order to have the same effective interest rate at all three …
  2. compounded interest

    A bank offers a rate of 5.3% compounded semi-annually on its four year GICs(Guaranteed Investment Certificates). What monthly and annually compounded rates should it quote in order to have the same effective interest rate at all three …
  3. math help plz!

    DigiCom wants to drop the effective rate of interest on its credit card by 2%. If it currently charges a nominal rate of 8% compounded daily, at what value should it set the new nominal rate?
  4. Finite Math

    Find the effective rate corresponding to the given nominal rate. (Round your answer to two decimal places.) 11%/year compounded semiannually
  5. Finite Math

    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.)
  6. Math

    Find the effective rate corresponding to the given nominal rate. (Round your answer to the nearest hundredth of a percentage point.) (a) 4%/year, compounded quarterly ?
  7. Math

    Find the effective rate corresponding to the given nominal rate. (Round your answer to the nearest hundredth of a percentage point.) (a) 4%/year, compounded quarterly ?
  8. Business Math

    What is the annual percentage yield of a $10,000 investment for 1 year at 12% interest compounded monthly?
  9. math

    Shannon invests $3,000, at 8% interest, compounded quarterly for one year. Use Table 11-1 to calculate the effective interest rate for her investment. (Round the effective rate to the nearest hundredth percent.)
  10. math

    The Sandersons are planning to refinance their home. The outstanding principal on their original loan is $110,000 and was to amortized in 240 equal monthly installments at an interest rate of 11%/year compounded monthly. The new loan …

More Similar Questions