Question

For a 2-year loan of $5,000, at 8% compounded quarterly, the effective interest rate is (NOTE: round to the nearest hundredth of one percent, x.xx%) _____%

For a 4-year loan of $5,000, at 6% compounded semi-annually, the compound interest is: $_____

Answer 1

Answer:

$i_e =0.1716 = 17.17%$

C.I = $1333.85

Step-by-step explanation:

effective interest rode is $i_e =(1+ \frac{i_m}{m})^{mt} -1$

where

i_e efffective rate of interest

i_m = rate of interest = 8%

m = nu,ner of compoundig period per year = 4

t = used for  loan time = 2

$i_e =(1+ \frac{0.08}{4})^{4*2} -1$

$i_e =0.1716 = 17.17%$

b)compound interest is given as

$C.I =P[ (1+ \frac{i_m}{m})^{mt}-1]$

we have P-5000 $

i_m -6%

m =2

t = 4

AFTER PUTTING EACH VALUE WE GET

C.I = $1333.85