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kvv77 [185]
3 years ago
15

What monthly rate of interest will yield an annual effective rate of interest of 14%?

Business
1 answer:
Zepler [3.9K]3 years ago
7 0

Answer: 1.1%

Explanation:

The effective annual interest rate is simply defined as the real return that is given on a savings account or any other form of investment that is interest paying which takes into consideration the effects of time compounding.

Based on the scenario in the question, the monthly rate of interest will yield an annual effective rate of interest of 14% will be:

= [(1.14)^1/12] - 1

= 1.01098 - 1

= 0.01098

= 1.1% approximately

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