Question

For a 2-year loan of $5,000, at 8% compounded quarterly, the effective interest rate is (NOTE: round to the nearest hundredth of one percent, x.xx%) _____%

For a 4-year loan of $5,000, at 6% compounded semi-annually, the compound interest is: $_____

Answer 1

`i_e =0.1716 = 17.17%`

C.I = $1333.85

Explanation:

effective interest rode is
`i_e =(1+ (i_m)/(m))^(mt) -1`

where

i_e efffective rate of interest

i_m = rate of interest = 8%

m = nu,ner of compoundig period per year = 4

t = used for loan time = 2

`i_e =(1+ (0.08)/(4))^(4*2) -1`

`i_e =0.1716 = 17.17%`

b)compound interest is given as

`C.I =P[ (1+ (i_m)/(m))^(mt)-1]`

we have P-5000 $

i_m -6%

m =2

t = 4

AFTER PUTTING EACH VALUE WE GET

C.I = $1333.85