Answer:
The interest is compounded quarterly.
The effective annual interest rate on the account is 8.60%.
Step-by-step explanation:
Compound interest:
The compound interest formula is given by:
Where A(t) is the amount of money after t years, P is the principal(the initial sum of money), r is the interest rate(as a decimal value), n is the number of times that interest is compounded per unit year and t is the time in years for which the money is invested or borrowed.
We are given:
Comparing to the general formula.
From the last one:
Which means 4 compoundings per year. This means that the interest is compounded quarterly.
Interest rate:
Since n = 4.
So the interest rate is of 8.60%.