Respuesta :
Answer:
Nominal rate = 15.40%, Periodic rate = 3.85% and effective interest rate = 16.31%
Step-by-step explanation:
An investor can invest money and earn a stated interest rate = 15.40%
We have to find the nominal, periodic and effective interest rates for this investment.
Nominal rate = Stated interest rate is also called annual percentage rate or nominal interest rate. Therefore nominal interest rate = 15.40%.
Periodic interest rate = Periodic interest rate is the annual interest rate divided by number of compounding periods.
Periodic rate = ( [tex]\frac{15.40}{4}[/tex] ) = 3.85%
Effective interest rate = We have to calculate Effective interest rate (EAR) by the formula = [tex]EAR=[(\frac{1+i}{n})^{n}-1][/tex]
where i = rate of interest and n = number of compounding periods
[tex]EAR=[(1+\frac{0.154}{4})^4]-1[/tex]
[tex]EAR=[(1+.0385)^{4}]-1[/tex]
[tex]EAR=[(1.0385)^{4}]-1[/tex]
EAR = 1.1631 - 1
EAR = 0.1631 = 16.31%
Therefore, Nominal rate = 15.40%, Periodic rate = 3.85% and effective interest rate = 16.31%
