Question 1153386

The formula for calculating effective yield is as follows:

{{{i = (1 + (r/n))^n - 1}}}

Where:

{{{i}}} = {{{2}}}% ={{{0.02}}}
{{{r}}} = nominal rate
{{{n }}}={{{4}}} ( compounded quarterly)


{{{0.02= (1 + (r/4))^4 - 1}}}

{{{0.02+1= 1/256 (r + 4)^4}}}

{{{1.02/(1/256)= (r + 4)^4}}}

{{{261.12= (r + 4)^4}}}

{{{root(4,261.12)= r + 4}}}

{{{4.01985= r + 4}}}

{{{4.01985-4= r }}}

{{{r=0.01985}}}

{{{r= 1.985}}}%