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WebWork 1: Problem 5 Previous Problem Problem List Next Problem (1 point) What nominal Interest rate compounded quarterly is equivalent to joo = 8%? Answer: 7
WebWork 1: Problem 5 Previous Problem Problem List Next Problem (1 point) What nominal Interest rate compounded quarterly is equivalent to joo = 8%? Answer: 7.77 % Preview My Answers Submit Answers You have attempted this problem 1 time. Your overall recorded score is 0%. You have 2 attempts remaining.
Expert Solution
We have j∞ = 8%
So the nominal interest rate is payable infinity = 8%
lim p→∞ jp = δ
Hence δ = 8%
So exp(δ) = (1+i)
⇒ i = exp(0.08) - 1
⇒ i (effective rate of interest) = 8.3287%
Now ,Let nominal rate of interest payable quarterly = r
⇒ (1 + r/4)^4 = (1+i)
⇒ r = ((1+i)^(1/4) - 1) * 4
⇒ r = ((1+0.083287)^(1/4) - 1) * 4
⇒ r = 8.0805%
Therefore , nominal rate of interest compounded quarterly is 8.0805%
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