Question

HELP PLEASEEE The nominal rate on Sarah’s loan is 7.250%. If the interest is compounded monthly, what rate of interest is Sarah actually paying?

a.
7.250%
b.
7.496%
c.
7.510%
d.
8.700%

Answer 1

Use the principal formula to help
P = P0(1 + r/n)^(n*t)

But here use 1 for P0, n is 12, t is 1 and r is 7.250% (0.0725)
P = (1 + (0.0725/12))^12
P = (1.00604167)^12
P = 1.07496

The percentage is the decimal part after the 1 which is 7.496% or B