Question

Find the effective rate of interest over a three year period which is equivalent to an effective rate of discount 8% for the first year, 7% for the second year, and 6% for the third year.

Answer 1

Explanation:

pretend you hav 100 dollars

after 1 year you have 1.08 x 100 dollars = 108 dollars

after two years yo have (108) ( 1.07) = 115.56 dollars

after three years you have 115.56 (1.06) = 122.49 dollars

You have gained 22. 49 dollars in three years

average is then 22.49 / 100 / 3 years = 7.497 %