What is the annual compounded interest rate of an investment with a stated interest rate of 6% compounded quarterly for seven years (round to the nearest .1%) ?

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Business

Kelly

17 July, 20:12

What is the annual compounded interest rate of an investment with a stated interest rate of 6% compounded quarterly for seven years (round to the nearest .1%) ?

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Antoine Rollins · Answer 1

The annual compounded interest rate of an investment with a stated interest rate of 6% compounded quarterly for seven years is 6.14%.

Explanation:

Interest Rate = r = 6% = 0.06

Compounding = n = quarterly = 4 times a year

Number of years = t = 7 years

Annual Compounded interest rate = [ (1 + r/n) ^n] - 1

Annual Compounded interest rate = [ (1 + 0.06/4) ^4 ] - 1

Annual Compounded interest rate = [ (1 + 0.015) ^4 ] - 1

Annual Compounded interest rate = [ (1.015) ^4 ] - 1

Annual Compounded interest rate = 1.06136355 - 1

Annual Compounded interest rate = 0.06136355

Annual Compounded interest rate = 6.14%