What is the effective annual rate if a bank charges you 8.25 percent compounded quarterly?

Name: What is the effective annual rate if a bank charges you 8.25 percent compounded quarterly?
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Question

Quizplus · Accepted Answer

To find the effective annual rate:

EAR = (1 + (APR/n))^n - 1

Where APR is the stated annual interest rate and n is the number of compounding periods per year.

Substituting the values, we get:

EAR = (1 + (0.0825/4))^4 - 1

EAR = 0.0851 or 8.51%

Therefore, the correct answer is D) 8.51 percent.

What Is the Effective Annual Rate If a Bank Charges