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What effective rate of interest is equivalent to 4
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%
Expert Solution
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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