Problem Statement
What is the effective annual rate corresponding to 12% per annum compounded quarterly?
Explanation
Effective rate equals one plus nominal divided by four to the power four minus one. One point zero three to the power four minus one is approximately zero point one two five five or twelve point five five percent.
Code Solution
SolutionRead Only
EAR = (1 + 0.12/4)^4 − 1 = (1.03)^4 − 1 ≈ 0.1255
