What is the effective interest rate of a loan that is compounded quarterly at a nominal interest rate of 3%?

Answer 1

The nominal interest rate is 3%; if it's being compounded quarterly, that means a nominal interest of 0.75% per quarter. The effective interest rate is (1 + i)^n - 1, where i the nominal interest and n is the number of periods. So here, it's

(1 + 0.0075)^4 - 1
= 0.030339
= 3.0339%

Answer 2

If you mean total interest payment for the whole year, Lets make assumption that the loan is 100,000 at 3% interest, Payable in one year term.

Here we go: First you have to find your quarterly payment.

The formula will be:

(i/4xP)divided by:
((i/4+1) -n power) -1

Where:
-n is number of payments
P is the principal
i is the interest

(.03/4)x100,000 = 750

the divisor will be: ((1.0075) to power of -4) -1 = -.0294458

750/-.0294458 = 25,470.50 quarterly payment

Four payments equals 101,882

minus principal of 100,000 equals 1,882 which is the total interest paid

Hope this helped you.




Comment to your problem is you mentioned compounded interest on loan. Loan interest is diminishing instead of compounding.

If you mean compounded interest for your investment, The right question will be: "How much is the yield interest per year?"

In this case, The second person that gave an answer will be correct and you'll notice the power of 4(n) is positive on his equation.

Answer 3

those are 2 diferent math classes. I took the two considered one of them. Finite arithmetic is greater of a survey direction, while information is greater specific. specific math classes are consistently greater good. as quickly as you get previous multi-variable calculus, I right here that math is all on an identical point of difficulty.

Answer 4

12%

Answer 5

The respondent who said 3.03% is correct.