Question

Wyatt is paying back a loan with a nominal interest rate of 13. 62%. If the interest is compounded quarterly, how much greater is Wyatt’s effective interest rate than his nominal interest rate? a. 0. 96 percentage points b. 0. 40 percentage points c. 0. 25 percentage points d. 0. 71 percentage points Please select the best answer from the choices provided A B C D.

Answer 1

Wyatt's effective interest rate would be greater than his nominal interest rate include option D: 0. 71 percentage points.

How much greater is Wyatt’s effective interest rate than his nominal interest rate?

Given Information:

Nominal interest rate =13. 62%

$Effective rate of return=(1+\frac{i}{m} )m-1\\\\Effective rate of return= (1+\frac{0.1362}{4})4}-1\\Effective rate of return=0.1433$

Here, the value of the effective rate of interest is 0.1433 that is multiplied with 100 to get the percentage value of 14.33%.

Hence, the difference between effective and nominal interest rates would be:

=14.33-13.62

=0.71%

Therefore, correct option is D.

Learn more about compound interest, refer to the link:

brainly.com/question/26077656