document.write( "Question 1109512: A fund earns interest at the nominal rate of 8% compounded quarterly. At
\n" ); document.write( "the end of each quarter, just after interest is credited, an expense charge
\n" ); document.write( "equal to 0.4% of the fund is withdrawn. Determine the annual effective
\n" ); document.write( "rate realized by the fund.
\n" ); document.write( " \n" ); document.write( "

Algebra.Com's Answer #724498 by addingup(3677) $\"\"$ $\"About$

You can put this solution on YOUR website!
Annual means that our t (time) = 4 (4 quarters in a year). Thus, our interest is 0.08/4 = 0.02.
\n" ); document.write( "Just after interest is credited, an expense charge equal to 0.4% of the fund is withdrawn, leaving us with 99.6% of the money or 0.996. So, after this withdrawal our money becomes:
\n" ); document.write( "(1.02 x 0.99.6)^4 = 1.0652 which makes the effective annual interest rate 6.52%
\n" ); document.write( " \n" ); document.write( "

\n" );