Question

Find the effective rate of return on an invest that earns 4.5% compounded quarterly.
AND
Find the effective rate of return on an invest that earns 7% compounded monthly.
so simple that I am super confused

Answer 1

me too :DD

Answer 2

Do you know the compound interest formula

Answer 3

A=P(1+(R/N))^(N*T)

Answer 4

Yes now just plug your numbers in

Answer 5

A is the ending amount, P is the principal, or starting amount, R is the interest rate (expressed as decimal), and N is the number of times per year it's compounded (4 if quarterly, 12 if monthly etc.) and T is time of investment in years... but plug in what numbers? All i am given is the rate.

Answer 6

You can put in the numbers for corresponding variables the. Solve for another variables that you are not given

Answer 7

That's the way I would go about it but it may not be exactly what you are being asked

Answer 8

? still confused.
here is the full question.
Find the effective rate of return on an invest that earns 7% compounded monthly.

First, express your answer as a decimal and NOT as a percentage. For example enter .085 for 8.5%. Enter your answer as a calculation or as a number but be sure to include at least FIVE decimals.
and the answer is not .085...

Answer 9

I mean the answer is not .07

Answer 10

Not 100% sure how to do this but the best thing that you can do is go to Kahn academy type in rate of return compound interest then you can watch a short video explaining how to do rate of return . Sorry it's the best thing I can do but it always helps me when I'm stuck

Answer 11

^totally, I'm a math video junkie as well. I've tried finding a video for this one, and I keep finding really long accounting videos that don't really apply. I'll keep looking, thanks for the help.

Answer 12

Use the formula for "effective interest rate"