SOLUTION: What interest rate compounded quarterly will yield an effective interest rate of 2​%?

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Question 1153386: What interest rate compounded quarterly will yield an effective interest rate of 2​%?
Answer by MathLover1(20849) About Me  (Show Source):
You can put this solution on YOUR website!

The formula for calculating effective yield is as follows:
i+=+%281+%2B+%28r%2Fn%29%29%5En+-+1
Where:
i = 2% =0.02
r = nominal rate
n+=4 ( compounded quarterly)

0.02=+%281+%2B+%28r%2F4%29%29%5E4+-+1
0.02%2B1=+1%2F256+%28r+%2B+4%29%5E4
1.02%2F%281%2F256%29=+%28r+%2B+4%29%5E4
261.12=+%28r+%2B+4%29%5E4
root%284%2C261.12%29=+r+%2B+4
4.01985=+r+%2B+4
4.01985-4=+r+
r=0.01985
r=+1.985%