What is the effective two-Near rate if a bank charges you - !*-too annualIN compounded quarterly ( A PR ) a

Finance Apr 02, 2021

What is the effective two-Near rate if a bank charges you - !*-too annualIN compounded quarterly ( A PR )
a. 7.98% b. 7.95% c. 7.86% d. 7.79% e. Different Number (write down the number)

Expert Solution

Computation of Effective two year Rate:

Effective Two Year Rate = (1+i/n)^n -1

Here,

i = APR = 7.64%

n = 4 (compounded quarterly)

Effective Two Year Rate = (1+7.64%/4)^4 - 1 = 7.86%

So, the correct option is C "7.86%".

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