Here's the problem:

What nominal rate compounded monthly has the same Annual Percentage Yield as 7% compounded quarterly?

How would I go about solving this?

Printable View

- Oct 8th 2009, 05:48 PMgdog26Can anyone help me with this?
Here's the problem:

What nominal rate compounded monthly has the same Annual Percentage Yield as 7% compounded quarterly?

How would I go about solving this? - Oct 8th 2009, 07:10 PMTKHunny
i = Annual Nominal Rate to be compounded monthly

The description of 7% is inadequate. Is that 7% quarterly or 7% Nominal Annual to be compounded quarterly? Let's go with the latter and we are nearly done.

j = i/12 = Monthly interest rate

k = 0.07/4 = Quarterly interest rate for 7%

Solve for j

Solve for i.