What effective rate of interest is equivalent to 4.4% compou

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What effective rate of interest is equivalent to 4

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What effective rate of interest is equivalent to 4.4% compounded quarterly?

A)

4.50%

B)

4.49%

C)

4.39%

D)

4.47%

E)

4.37%

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Computation of Effective Rate of Interest:

Effective Rate of Interest = (1+i/n)^n - 1

Here,

i = Interest Rate = 4.4%

n = Number of Compounding Periods = 4 quarters

Effective Rate of Interest = (1+4.4%/4)^4 - 1 = 4.47%

So, the correct option is D "4.47%".

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