Given:
Sam took out a loan for 6200 that charges an annual rate of 8.6% compounded quarterly.
Required:
Find effective annual interest rate.
Explanation:
a).
We know compound interest formula
[tex]A=P(1+\frac{r}{n})^{nt}[/tex]
Now,
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b).
We know the effective annual interest rate
[tex]EAR=(1+\frac{i}{m})^m-1[/tex]
EAR = Effective annual interest
i = Annual nominal rate of interest
m = No. of compounding periods in a year.
[tex]\begin{gathered} EAR=(1+\frac{0.086}{4})^4-1 \\ EAR=0.088813 \\ \text{ To find percentage multiply by 100 } \\ =0.088813\times100 \\ =8.8813\% \end{gathered}[/tex]
Answer:
answered the question.
