Question

Given the rate per compounding period, find r, the annual rate.
0.425% per month

Answer 1

Explanation:

To find the annual rate given the rate per compounding period, we need to convert the rate from the compounding period to the annual period. In this case, the rate is given as 0.425% per month.

One way to convert the rate is to multiply it by the number of compounding periods in a year:

r = 0.425%/month * 12 months/year

r = 5.1%/year

Therefore, the annual rate, r, is 5.1%.