Answer:
Effective annual rate is 16.31%.
Nominal Rate = 14%
Explanation:
Effective annual rate = [(1 + 15.40 / 4) ^ 4] - 1
= [(1 + 3.85%) ^ 4] - 1
= 1.1631 - 1
= 16.31%
Effective annual rate is 16.31%.
Solution for question 2
Nominal Rate = 14%
Effective annual rate = [(1 + 14 / 2) ^ 2] - 1
= [(1 + 7%) ^ 2] - 1
= 1.1449 - 1
= 14.49%
Effective annual rate is 14.49%.
Annual rate = 5%
