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  • 14-01-2021
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If the nominal annual interest rate is 9% compounded quarterly, what is the effective annual interest rate

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Parrain
Parrain Parrain
  • 14-01-2021

Answer: 9.3%

Explanation:

You can find the effective annual rate by the formula:

effective rate = (1 + nominal rate/ no. of compounding periods in a year)^no. of compounding periods in a year - 1

= (1 + 9%/4)⁴ - 1

= ‭1.093 - 1

= 9.3%

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