You are quoted an interest rate of 14% per year, compounded quarterly. What is the effective...

You are quoted an interest rate of 14% per year, compounded quarterly. What is the effective yearly interest rate?You are quoted an interest rate of 14% per year, compounded quarterly. What is the effective yearly interest rate?

Expert Solution

Effective per period interest rate =nominal annual interest rate/number of compounding per year=14/4=3.5

Effective annual interest rate =(1+effective per period interest rate )^( number of compounding per year) -1

=(1.035^4)-1

=0.147523

=14.7523%

the effective yearly interest rate is 14.75%

Rahul Sunny answered 2 years ago

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