The correct option for Tiffany to be effective at the interest rates both quarterly and semiannually is approx to 0. 1681 percentage points.
<h3>Effective Interest Rate:</h3>
We have given with the stated interest rate = 8.145%.
The formula for effective interest rate,
Where, r = effective interest rate,
i = stated interest rate,
n = number of compounding periods,
<h3>Tiffany's effective interest rate:</h3>
Tiffany's effective interest rate if the interest is compounded weekly, Stated interest rate, i = 8.145%,
Number of compounding periods, n = 1 week = 1,
Number of compounding periods, n = 1 year = 52 weeks = 52,
Tiffany's effective interest rate be if the interest is compounded semiannually,
Stated interest rate, i = 8.145%,
Number of compounding periods, n = for half year = 1,
Number of compounding periods, n = 2 semiannually = 2,
Thus, the effective interest rate will remain unchanged for the first week and one semiannually, but will undoubtedly alter after a year.
As a result, Tiffany's effective interest rate will be if interest is compounded weekly rather than semiannually.
As a result, option c, 0.1689, is right.
Learn more about the effective annual rate here:
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