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lianna [129]
3 years ago
13

If the quoted rate for a short term loan is 28.79% APR, and interest is compounded continuously, what is the effective interest

rate per quarter and the effective annual interest rate
Business
1 answer:
s2008m [1.1K]3 years ago
7 0

Answer:

The effective Annual interest rate is 32.05%

The effective interest rate per quarter is 8.01%

Explanation:

The effective interest rate is the interest rate adjusted to the nominal interest rate by the compounding or periods of an interest rate so in this case the nominal interest rate is 28.79% which is the annual percentage rate so we will calculate the annual effective interest rate by the following formula :

ieff = (1+inom/n)^n

where we substitute the above mentioned nominal interest rate 28.79% which is inom.

n represents the periodic payments which is 4 here as we are told the compounding happens per quarter. then we will substitute on the above mentioned formula to get ieff which is the effective interest rate.

ieff = (1+28.79%/4)^4

ieff = 32.05% which is the effective annual interest rate

then the effective interest rate per quarter is 32.05%/4= 8.01% as that is the annual interest rate adjusted to per quarter.

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The number of years in which the money is in the account is 6 years.

<h3>What is simple interest?</h3>

Simple interest denotes the amount of payment that is received or paid by a person in return for anything pledged or given a loan.

The interest computed on the principal amount for a specified duration of time and rate of interest is called simple interest.

The formula of simple interest:

\text{SI}= \text{P}\times r \times t

Where, (P) stands for principal, (r) for interest rate, and (t) is for the time period.

<u>Computation </u><u>of a number of years:</u>

According to the given information,

P=$500,

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Now, substitute the given values in the above formula, we have:

\text{SI}= \text{P}\times r \times t\\\\\$225=\$500\times\ 7.5\%\times t\\\\t= 6 \text{Years}

Therefore, the number of years is 6 years.

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brainly.com/question/2793278

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This question is incomplete because the text is missing; here is the missing part:

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