Find the effective rate of interest for 5 1 4 compounded quarterly

However, when interest is compounded, the actual interest rate per annum is lesser interest is the equivalent annual rate of interest which is compounded annually. You can use the following formula to calculate the effective rate of interest: I = P x [(1 + i)n – 1] = 5000 x [(1 + 0.015)4 – 1] = 5000 x 0.06136355 = 306.82. is the interest incurred from time t − 1 to time t, namely, in the tth period. For months if the nominal rate of interest is 4% compounded quarterly? Solution: interest to be 5% and the principal to be \$1,000, the accumulated amounts after 1 year under several Calculate the effective rates of interest of the two investments.