Determine the equivalent nominal rate of interest compounded monthly, as 8.4% compounded quarterly.
A) 8.34%
B) 8.67%
C) 9.04%
D) 9.16%
E) 9.34%

Question

Quizplus · Accepted Answer

The equivalent nominal rate of interest compounded monthly is 8.34%, which is choice A.The formula for converting an annual interest rate compounded quarterly to an equivalent nominal rate compounded monthly is:(1 + quarterly rate/4)^4 - 1In this case, the quarterly rate is 8.4% / 4 = 2.1%.So, the equivalent nominal rate compounded monthly is:(1 + 0.021)^4 - 1 = 0.0834 or 8.34%

Determine the Equivalent Nominal Rate of Interest Compounded Monthly, as 8.4