An interest rate is quoted as 8% per annum compounded quarterly.What is the effective annual rate?
A)8.00%
B)8.22%
C)8.24%
D)8.34%

Question

Quizplus · Accepted Answer

The effective annual rate (EAR) can be calculated using the formula: EAR = (1 + i/n)^(n*t) - 1, where i is the nominal rate (0.08), n is the number of compounding periods per year (4), and t is the number of years (1). Plugging in the values, EAR = (1 + 0.08/4)^(4*1) - 1 = 0.08243216 or 8.24%.

An Interest Rate Is Quoted as 8% Per Annum Compounded