Concept explainers
To determine effective yield of 12% compounded quarterly.
Answer to Problem 13P
The effective yield of 12% compounded quarterly is approximately 12.6%.
Explanation of Solution
Given information:
Rate = 12%
Formula to calculate amount for rate compounded quarterly for one year is,
Now we know that the amount for one year compounded annually is,
Now compare this with equation 1
The effective yield of 12% compounded quarterly is approximately 12.6%
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