Answer:
The effective annual rate is 11.03%
Step-by-step explanation:
The effective interest rate is calculated through the formula:
[tex]r = (1 + i/n)^n - 1[/tex]
In this formula, r represents the effective interest rate, i represents the stated interest rate or APR, and n represents the number of compounding periods per year.
For a quarterly compounded interest, n=4. The APR i=10.60%=0.106
Given an APR r, the effective annual rate for a quarterly compound is:
[tex]r = (1 + 0.106/4)^4 - 1=1.0265^4-1[/tex]
[tex]r=1.11029-1=0.1103[/tex]
The effective annual rate is 11.03%
