A life insurance company offers loans to its policyholders against the cash value of their policies...

A life insurance company offers loans to its policyholders against the cash value of their policies at a (nominal) annual interest rate of 6 percent, compounded quarterly. Determine the effective annual percentage interest rate on these loans. Round your answer to two decimal places.

show work in excel please

Solutions

Expert Solution

EAR = [(1 +stated rate/no. of compounding periods) ^no. of compounding periods - 1]* 100

Effective Annual Rate = ((1+6/4*100)^4-1)*100

Effective Annual Rate% = 6.14

jeff jeffy answered 2 years ago

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