# interest rates

• Nov 5th 2008, 06:18 AM
mcinnes
interest rates
Determine the effective annual rate of interest charged on a loan if the nominal rate is 5.4% pr annum, compounded quarterly.

LOL, I dont get it:P
• Nov 5th 2008, 09:02 AM
masters
Quote:

Originally Posted by mcinnes
Determine the effective annual rate of interest charged on a loan if the nominal rate is 5.4% pr annum, compounded quarterly.

LOL, I dont get it:P

A formula would help:

$\displaystyle r=\left(1+\frac{i}{n}\right)^n-1$

r = effective interest rate as a decimal

i = nominal interest rate as a decimal (in your case, .054)

n = number of compounding periods in per year (in your case, 4)
• Nov 5th 2008, 09:29 AM
jonah
Quote:

Originally Posted by mcinnes
Determine the effective annual rate of interest charged on a loan if the nominal rate is 5.4% pr annum, compounded quarterly.

LOL, I dont get it:P

If you still don't get after masters giveaway hint, try hitting your books more often. You'll get it eventually.
• Nov 5th 2008, 09:49 AM
mathceleb
Quote:

Originally Posted by mcinnes
Determine the effective annual rate of interest charged on a loan if the nominal rate is 5.4% pr annum, compounded quarterly.

LOL, I dont get it:P

Go here and enter 5.4 in the "Enter Nominal Interest Rate" box.

Effective Annual Yield Rate of Interest

It will show you each line of math to get the answer of 5.51% effective rate of interest. Let me know if you have questions.
• Nov 6th 2008, 03:37 AM
HallsofIvy
Will he have that available on a test?