Answer:
Rebecca is incorrect. The equivalent quarterly interest rate is 1.75%.
Explanation:
The formula for compound interest is i = r/n.
r represents the interest rate in decimal form.
n represents the compounding periods in a year.
Calculate the interest rate for 7% compounded quarterly:
Since interest compounded quarterly is four times a year, n = 4.
7% is converted to decimal form by dividing by 100.
7 / 100 = 0.07
r = 0.07
Substitute these into the formula:
i = r/n
= 0.07/4
= 0.0175
0.0175 is in decimal form. To convert it to a percentage, multiply it by 100.
0.0175 X 100 = 1.75%
1.75% ≠ 2%
Therefore, Rebecca is incorrect. The equivalent quarterly interest rate is 1.75%.
