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victus00
6 days ago
9

If the nominal rate of interest is 10% per annum and there is quarterly compounding, the effective rate of interest will be: a)

10% per annum b) 10.10 per annum c) 10.25%per annum d) 10.38% per annum​
Mathematics
1 answer:
Inessa [12.5K]6 days ago
6 0

9514 1404 393

Response:

  d) 10.38%

Step-by-step clarification:

The multiplier for four quarters of quarterly compounding is...

  (1 +10%/4)^4 = 1.025^4 = 1.103812890625

This translates approximately to 1 + 10.38%

The effective interest rate is around 10.38% annually.

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This may be a bit awkward to explain in writing, so please bear with me:)

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