Question

if your effective annual discount rate is 7%, what is your effective quarterly interest rate?

Answer 1

ANSWER=

GIven-

Effective Annual Interest rate = 7% Per Annum

Required-

Effective Quaterly interest rate - ?

Explanation:-

i) There are 4 Quarter consists of 3 Month in a Quarter in the Year i.e. Per annum

So,

Effective rate of interest per quarter = 7% P.a. / 4

= 1.75% - (Answer)

OR

ii) - By way of Formula:-

Given:-

1 Quarter = 3 Month period

Interest rate P.a. = 7%

Therefore,

For Effective interest rate = ( 1 + i / n)ⁿ- 1

=(1+0.07 / 3)³- 1

=1.75%-(Answer)

Here,

i = Rate of interest

n = Period