Question

If the effective interest is 12% per annum and the interest is compounded quarteely, the nominal interest per annum is? ​

Answer 1

Answer:

11.5% nominal interest rate …

Step-by-step explanation:

Let x be the nominal interest rate. Then:

(1+x/4)^4=1+12%

=1.12

(1+x/4)^4=1.12

Take the log of each side:

log (1+x/4)^4=log 1.12

4 log (1+x/4)=0.04921802267

log (1+x/4)=0.0123045

10^log (1+x/4)=10^0.0123045

1+x/4=1.02873

x/4=0.02873

x=11.5% nominal interest rate …