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.

Explanation:

a).

We know compound interest formula

$A=P(1+\frac{r}{n})^{nt}$

Now,

$undefined$

b).

We know the effective annual interest rate

$EAR=(1+\frac{i}{m})^m-1$

EAR = Effective annual interest

i = Annual nominal rate of interest

m = No. of compounding periods in a year.

$\begin{gathered} EAR=(1+\frac{0.086}{4})^4-1 \\ EAR=0.088813 \\ \text{ To find percentage multiply by 100 } \\ =0.088813\times100 \\ =8.8813\% \end{gathered}$

Answer:

answered the question.