Question

An investor makes a 12 year deposit of $7,357. The bank is paying an interest rate of 13% per year, compounding quarterly. Calculate "i" (interest rate per period) correct to 2 decimal places. Please do not enter "%" into your answer box

Answer 1

The interest rate per period (i) for the deposit with an annual interest rate of 13%, compounded quarterly, is 3.25, when expressed as a decimal and rounded to two decimal places.

Step-by-step explanation:

The question involves calculating the interest rate per period for a 12-year deposit with an annual interest rate of 13%, compounded quarterly. Since interest is compounded quarterly, we need to divide the annual interest rate by the number of compounding periods per year. In this case, there are 4 quarters in a year.

To calculate the interest rate per period (i), we use the following formula:

i = annual interest rate / number of periods per year

Therefore,

i = 0.13 / 4 = 0.0325

Converting this to a percentage and rounding to two decimal places:

i = 3.25%

However, as requested, we do not include the percentage sign in the answer.