Wyatt is paying back a loan with a nominal interest rate of 13. 62%. If the interest is compounded quarterly, how much greater i
1 answer:
Wyatt's effective interest rate would be greater than his nominal interest rate include option D: 0. 71 percentage points.
<h3>How much greater is Wyatt’s effective interest rate than his nominal interest rate?</h3>Given Information:
Nominal interest rate =13. 62%
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.
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Answer:
Explanation:
Using future annuity formula
Fv = Pmt ( (1+r)ⁿ -1 )/ r
+ 1 = (1+r)ⁿ
In ( + 1) = n In ( 1+r)
n = In ( + 1) / In ( 1 + r)
FV, future value = $10,000, Pmt, periodic payment per year = $1,100, r rate = 11.82% = 0.1182 and n = number of years
n = 0.7297 / 0.11172 = 6.53 years approx 7 years
the last year payment will actually be less than $1,100