Question

1.An investment will quadruple your money in 12 years. What is the nominal rate of interest...

1.An investment will quadruple your money in 12 years. What is the nominal rate of interest convertible quarterly?

Answer = % (3 Sig Fig)

2.AJ takes out a small business loan of $15000 at a nominal rate of interest of 10.6% convertible quarterly. One year later, he repays $ 3500. Two years after that, the bank wants to sell AJ's loan to another institution. How much does AJ owe at that time?

Answer =  dollars. (3 Sig Fig)

Homework Answers

Answer #1

1)

Effective annual rate is 12.25%

APR = [(1+EAR)^(1÷n)-1]×n
n is number of compounding per year
Quarterly compounding 11.72% ((1+12.25%)^(1/4)-1)*4

Hence, Nominal rate of interest convertible quarterly is 11.72%

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