Choose the one alternative that best completes the statement or answers the question.
Find the effective rate of interest.
-5.5% compounded quarterly
A) 6.405%
B) 5.623%
C) 5.614%
D) 5.705%

Question

Quizplus · Accepted Answer

The effective rate of interest can be calculated using the formula: $ (1 + \frac{r}{n})^n - 1 $, where $ r $ is the nominal rate and $ n $ is the number of compounding periods per year. For 5.5% compounded quarterly, $ r = 0.055 $ and $ n = 4 $. The calculation gives approximately 5.614%.

Choose the One Alternative That Best Completes the Statement or Answers