What Is the Effective Interest Rate of 4% Compounded Quarterly

question 64

Multiple Choice

What is the effective interest rate of 4% compounded quarterly?

• A) 4.60%
• B) 4.80%
• C) 4.16%
• D) 4.06%
• E) 4.76%

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Definitions:

Mutually Exclusive Events

Two or more events that cannot occur at the same time, making it impossible for them to happen simultaneously in any given trial.

Probabilities

The quantification of how likely an event is to happen, expressed as a number ranging from 0 to 1, with 0 meaning it cannot occur and 1 meaning it will definitely happen.

Double Counting

An error in calculation or analysis that occurs when the same data or transaction is counted more than once, leading to inaccuracies.

Joint Probability Distribution

A statistical measure that gives the probability of two events occurring together and at the same point in time.