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Math Help - interest rates

  1. #1
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    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
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  2. #2
    A riddle wrapped in an enigma
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    Quote Originally Posted by mcinnes View Post
    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:

    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)
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  3. #3
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    Quote Originally Posted by mcinnes View Post
    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.
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  4. #4
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    Quote Originally Posted by mcinnes View Post
    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.
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  5. #5
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    Will he have that available on a test?
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