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Math Help - interest rate

  1. #1
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    interest rate

    Find the effective rate of interest corresponding to a nominal rate of 7%/year compounded annually, semiannually, quarterly, and monthly. (Round your answers to two decimal places.)
    annually semiannually quarterly monthly
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  2. #2
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    Quote Originally Posted by Dadillar View Post
    Find the effective rate of interest corresponding to a nominal rate of 7%/year compounded annually, semiannually, quarterly, and monthly. (Round your answers to two decimal places.)
    annually semiannually quarterly monthly
    using the formual of r=(1+\frac{i}{n})^n-1 where n is the number of compounding periods;
    Annual - 7%
    Semiannual - r=(1+\frac{0.07}{2})^2-1=7.12\%
    Quarterly - r=(1+\frac{0.07}{4})^4-1=7.19\%
    Monthly - r=(1+\frac{0.07}{12})^{12}-1=7.23\%
    Last edited by Robb; September 24th 2009 at 07:51 PM.
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