Hi there, I am trying to figure out how to calculate interest rates. If the interest rate is 3.75% per year compounded quarterly, what is: a) Effective quarterly rate b) effective anual rate How do i solve these? Thank you

Hi there, I am trying to figure out how to calculate interest rates. If the interest rate is 3.75% per year compounded quarterly, what is: a) Effective quarterly rate b) effective anual rate How do i solve these? Thank you

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 8MC: Define the stated (quoted) or nominal rate INOM as well as the periodic rate IPER. Will the future...

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Question

Hi there,

I am trying to figure out how to calculate interest rates. If the interest rate is 3.75% per year compounded quarterly, what is:

a) Effective quarterly rate

b) effective anual rate

How do i solve these?

Thank you

Expert Solution

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Step 1: Let us first look at the information given in the question

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Step 2: Now, we will calculate the effective quarterly rate

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Step 3: Calculation Effective Annual Rate (EAR) using formula

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Step 4: Calculation of EAR using Excel

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Solution

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how do i calculate the rate per year compounded semi-annually?

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