Question

A bank is advertising the following savings account.

Sweety Saver
Interest rate: 6.5%
Interest paid quarterly
Calculate the AER on this savings account.
Give your answer as a percentage correct to 2 decimal places.

Answer 1

6.66%

Explanation:

((1 + r/m)^n) - 1

Interest rate , r = 6.5%

m = number of compounding times per period = 4 (quarterly interest)

((1 + 0.065/4)^4) - 1

((1 + 0.01625) ^4) - 1

((1.01625)^4) - 1

1.06660 - 1

= 0.0666

0.0666 * 100%

= 6.66%