Concept explainers
To calculate: The effective quarterly interest rate.
Answer to Problem 10HP
Yoshio is incorrect! Because it is to divide simply the annual interest rate by 4. The correct answer is 0.525%.
Explanation of Solution
Given information: Annual interest rate is 2.1%
One quarter means three months.
That’s there are four quarters in 1 year.
Divide the annual interest rate by 4 to get quarterly interest rate.
So,
Annual interest rate
Conclusion: Yoshio is incorrect! Because it is to divide simply the annual interest rate by 4.
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