What is the effective annual rate of 13.9 percent compounded quarterly?

Question

Quizplus · Accepted Answer

To calculate the effective annual rate, we need to use the formula:

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

where APR is the annual percentage rate and n is the number of compounding periods per year. In this case, APR = 13.9% and n = 4 (since it's compounded quarterly).

Plugging these values into the formula, we get:

EAR = (1 + 0.139/4)^4 - 1
EAR = 0.1464 or 14.64%

Therefore, the answer is choice D.

What Is the Effective Annual Rate of 13