Answer to Question #292932 in Financial Math for Mir

Question

If the effective rate of interest is compounded quarterly is 16%, then the nominal rate of interest is

Answer 1

Answer

Where i = I/100 and r = R/100; nominal interest rate per period

r = m × [ ( 1 + i)^1/m - 1 ]

i is the effective rate,

m is the number of compounding periods.

i=0.16

m=4

$r=4×[(1+0.16)^¼-1]$

r=0.1512

Nominal rate of interest R=15.12%