Question

If the nominal annual interest rate is 9% compounded quarterly, what is the effective annual interest rate

Answer 1

Answer: 9.3%

Step-by-step explanation:

You can find the effective annual rate by the formula:

effective rate = (1 + nominal rate/ no. of compounding periods in a year)^no. of compounding periods in a year - 1

= (1 + 9%/4)⁴ - 1

= ‭1.093 - 1

= 9.3%