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Homework answers / question archive / You have $10,000 deposited in a savings account
You have $10,000 deposited in a savings account. The money has been earning an annual rate of 12% Interest, compounded quarterly. What is your effective annual rate of interest? 13.30% 12.25 1165% 0 12.55% 12%
The sum invested 10000
Rate = 12 % pa
Compounded quarterly
SO the Effective interest rate EIR
EIR % = (1+ R/n ) ^ n – 1
Where
R is the Nominal interest rate
N Is the number of compounding
So Putting the values
EIR = ( 1+ 0.12 /4 ) ^ 4 ) – 1 = 0.1255 or 12.55 %
So the effective rate is Option D 12.55 %
