At What Rate of Interest (Compounded Monthly) Will Quarterly Payments

question 207

Multiple Choice

At what rate of interest (compounded monthly) will quarterly payments of $2,000 accumulate to $25,000 in three years?

• A) 6.95%
• B) 5.95%
• C) 4.95%
• D) 3.95%
• E) 2.95%

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Definitions:

Effective Interest

The actual interest rate incurred on a loan or bond, reflecting the amortization of any fees or additional costs over the life of the loan.

Interest Revenue

Income earned from investments, loans, and other sources requiring the borrower to pay interest.

Bond Investments

Financial investments in debt securities issued by corporations or governments, which pay interest and are meant to be repaid at maturity.

Amortized

The gradual reduction of a debt over time by making regular payments that cover both principal and interest.