homework help ?

Question

what is 10.5 % compounded quarterly ?

Answer 1

I'll just correct what Louis wrote, it's easier:

If the 10.5% is an annual 'nominal' rate (not simple!), then the quarterly rate is 10.5% / 4 = 2.625% and the annual rate compounded quarterly is:

[(1.02625^4)-1]*100 = 10.9207 per annum

If the 10.5% is an 'effective' annual rate and the interest is compunded quarterly, then the quarterly rate is [(1.105)^(1/4)-1]*100 = approx. 2.52754762%. In this case the nominal annual rate would be:

[(1.025275)-1]*4*100 = 10.11 per annum

If the 10.5% is an effective quarterly rate and the interest is compounded quarterly, then the annual interest rate is [(1.105)^4-1]*100 = 49.0902050625%

If the 10.5% is a nominal quarterly rate and the interest rate is compounded monthly, then the quarterly interest rate is
[[(1+(10.5/3)/100)^3]-1]*100 = 10.871

You could say a lot more but you must be sure of the following:

1) Is your rate nominal or effective?
2) What is the compounding period?
3) How do you want to express the rate:
As annual, semi-annual, quarterly, monthly,
etc.

Answer 2

If the 10.5% is an annual rate and the interest is simple, then the quarterly rate is 10.5% / 4 = 2.625%.

If the 10.5% is an annual rate and the interest is compunded quarterly, then the quarterly rate is 1 - (1.105)^(1/4) = approx. 2.52754762%

If the 10.5% is a quarterly rate and the interest is compounded quarterly, then the annual interest rate is 1 - (1.105)^4 = 49.0902050625%

Answer 3

If you're talking about interest/annuities, then you would divide it by 4 (4 quarters).

Answer 4

I = P(1 + (.105/4))^(4t)
I = P(1 + .02625)^(4t)
I = P(1.02625)^(4t)