Find the effective annual interest rate for the given nominal annual interest rate. Round your answers to the nearest
0.01%.
-4.7% compounded monthly

Question

Quizplus · Accepted Answer

The effective annual interest rate can be calculated using the formula: $ (1 + \frac{r}{n})^n - 1 $, where $ r $ is the nominal annual interest rate (expressed as a decimal) and $ n $ is the number of compounding periods per year. For a 4.7% interest rate compounded monthly, $ r = 0.047 $ and $ n = 12 $. Plugging these values into the formula gives an effective annual rate of approximately 4.80%.

Find the Effective Annual Interest Rate for the Given Nominal