Respuesta :
Answer:
D. Interest is compounded annually at a rate of 4.25%
Step-by-step explanation:
Here's why; We need to calculate the effective annual rate (EAR) for each option. The formula to calculate EAR is:
\[EAR = \left(1 + \frac{r}{n}\right)^n - 1\]
- \(r\) is the annual nominal interest rate
- \(n\) is the number of compounding periods per year
Let's compute the EAR for each option and compare:
A. For quarterly compounding at 4.20%:
\(EAR_A = \left(1 + \frac{0.042}{4}\right)^4 - 1 \approx 0.0428\)
B. For monthly compounding at 4.15%:
\(EAR_B = \left(1 + \frac{0.0415}{12}\right)^{12} - 1 \approx 0.0423\)
C. For semiannual compounding at 4.10%:
\(EAR_C = \left(1 + \frac{0.041}{2}\right)^2 - 1 \approx 0.0421\)
D. For annual compounding at 4.25%:
\(EAR_D = \left(1 + 0.0425\right)^1 - 1 = 0.0425\)
Comparing the calculated effective annual interest rates, we find that option D, where interest is compounded annually at a rate of 4.25%, has the highest effective annual interest rate of approximately 4.25%.
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- Brainly
https://brainly.com/question/48078200
