Answer:
the effective annual interest rate is 12.55 %
Step-by-step explanation:
The computation of the effective annual interest rate is shown below:
Effective annual interest rate is calculated by using the following formula
= {(1 + interest ÷ number of compounding period)^number of compounding period} - 1
= (1 + .12 ÷ 4)^4-1
= (1.03)^4 - 1
r = 1.1255 - 1
r=.1255
hence, the effective annual interest rate is 12.55 %