Question

Same took out a loan for 6200 that charges an annual rate of 8.6% compounded quarterly. Answer each part. Sent picture

Answer 1

Given:

Sam took out a loan for 6200 that charges an annual rate of 8.6% compounded quarterly.

Required:

Find effective annual interest rate.

Step-by-step explanation:

a).

We know compound interest formula

`A=P(1+(r)/(n))^(nt)`

Now,

b).

We know the effective annual interest rate

`EAR=(1+(i)/(m))^m-1`

EAR = Effective annual interest

i = Annual nominal rate of interest

m = No. of compounding periods in a year.

`\begin{gathered} EAR=(1+(0.086)/(4))^4-1 \\ EAR=0.088813 \\ \text{ To find percentage multiply by 100 } \\ =0.088813*100 \\ =8.8813\% \end{gathered}`

Answer:

answered the question.