Question

If the discount rate is 24 percent compounded quarterly, what is the effective weekly rate? (Assume a 52 week year.)

26.25%

1.92%

0.45%

7.43%

Answer 1

Answer is 0.45%

Discount Rate = 24% compounded quarterly

Effective Annual Return = (1 + APR/n)^n - 1
Effective Annual Return = (1 + 0.24/4)^4 - 1
Effective Annual Return = (1 + 0.06)^4 - 1
Effective Annual Return = 1.2625 - 1
Effective Annual Return = 0.2625
Effective Annual Return = 26.25%

Effective Weekly Rate = (1 + EAR)^(1/52) - 1
Effective Weekly Rate = (1 + 0.2625)^(1/52) - 1
Effective Weekly Rate = 1.2625^(1/52) - 1
Effective Weekly Rate = 1.0045 - 1
Effective Weekly Rate = 0.0045
Effective Weekly Rate = 0.45%