Solve the problem.
-Ellen invests her money in a savings account which compounds interest quarterly and which gives an effective annual yield of 4.18%. What is the nominal rate?

Question

Quizplus · Accepted Answer

The nominal rate can be found using the formula for the effective annual rate (EAR) for interest compounded quarterly: $EAR = (1 + \frac{i}{4})^4 - 1$, where $i$ is the nominal rate divided by 100. Rearranging to solve for $i$, given an EAR of 4.18% or 0.0418, we get $i = 4 \times (\sqrt[4]{1 + 0.0418} - 1)$, which calculates to approximately 4.12%.

Solve the Problem. -Ellen Invests Her Money in a Savings Account Which Compounds