The annual interest rate of Erika's savings account is 6.4%, and simple interest is calculated quarterly. What is the periodic interest rate of Erika's account?
1 Answer
Jan 27, 2018
Explanation:
The annual interest rate is given at 6.4%. Knowing that
I=Pxxixxn , isolate the unknown variable; that is,i
i=(I)/(Pxxn) where:
I="Interest"
P="Principal"
i="interest rate"
n="number of years"
Multiplying the equation by
i=(I)/(Pxxn)}1/4 ;
color(red)(i/4)=(I)/(Pxx4n where:
color(red)(=i/4=0.064/4=0.016=1.6% "per qtr")=" the quarterly interest rate that is equally distributed for a year "
i=(cancel(4)xxI)/(Pxxcancel(4)n)
i=(I)/(Pxxn) , the original formula