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17

Finance

17.Find the effective rate of annual interest 9% that paid quaterly.
Select one:
a. 9.5%
b. 9.10%
c. 9.3%
d. 9.0%

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Effective rate of interest = [( 1 + Annual Interest rate / Number of Compounding) ^ Number of compounding] - 1

Number of Compounding = Quarterly

= 12 Months / 3 Months

Number of compounding = 4

Effective rate of interest =[ ( 1 + 9%/4)^4] - 1

= (1 + 2.25%)^4 - 1

= (1.0225)^4 - 1

=1.09308331879- 1

= 0.09308331879

In Percentage . 0.09308331879 * 100

= 9.308331879%

So, Rounded to two decimals, The Effective rate of interest is 9.30% [Option C is the correct answer]