A borrower is faced with the following interest rates and associated compounding. Which rate would the borrower perfer? ------------------- a) 14.0% p.a. compouding quarterly; b) 13.8% p.a. compounding monthly; 15% p.a. compouding annually. which is correct and please write the formula please! thank
2007-12-31 13:03:00 · 2 answers · asked by mmsmms2110 1 in Education & Reference ➔ Higher Education (University +)
a) 14.0% p.a. compouding quarterly;
b) 13.8% p.a. compounding monthly;
c)15% p.a. compouding annually;
d)14.5% p.a. compouding quartertly
2007-12-31 13:49:45 · update #1
15 p.a yearly
2007-12-31 13:11:56 · answer #1 · answered by Anonymous · 0⤊ 0⤋
You need to find the APR. The formula is:
(1+R/N)^N - 1
where R is the nominal rate and N is the number pf periods per year. That means that you need to compare:
(1+0.14/4)^4 - 1
(1+0.138/12)^12 - 1
15%
2007-12-31 13:22:52 · answer #2 · answered by Ranto 7 · 0⤊ 0⤋