SOLUTION: What is the effective annual rate of nominal of 4% compounded quarterly?

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Question 1190789: What is the effective annual rate of nominal of 4% compounded quarterly?
Answer by Theo(13342) About Me  (Show Source):
You can put this solution on YOUR website!
to find the effective annual rate, you do the following:

divide 4% by 4 to get 1% per quarter.
divide that by 100 and add it to 1 to get a growth factor of 1.01 per quarter.
raise that to the 4th power to get a growth factor of 1.01 ^ 4 = 1.04060401 per year.
subtract 1 from that and multiply it by 100 to get an effective interest rate of 4.060401% per year.