Compound Interest-10th Grade-2

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The nominal rate is 8% compounded quarterly. Find the effective rate.

Solution: Nominal rate (R %) = 8%

Number of conversion period in a year (n) = 4

Effective rate = (1 + 8/400)⁴ - 1

=(1 + 0.02)⁴ - 1

= 1.0824 – 1= 0.0824

= 08.24/100

= 8.24%

So, the required effective rate of interest = 8.24%