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Annual effective

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Annual effective

  • This topic has 1 reply, 2 voices, and was last updated 11 years ago by John Moffat.
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  • December 17, 2014 at 2:33 pm #220991
    6shahir
    Member
    • Topics: 198
    • Replies: 293
    • ☆☆☆

    Investment q offers one interest payment of 18% at the end of its 4 yr life

    how to calculate the annual effective interest payments???
    the answer is 4.22% but how?

    December 17, 2014 at 5:26 pm #221007
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54812
    • ☆☆☆☆☆

    If r is the annual interest rate, then (1+r)^4 = 1.18

    So 1+r = fourth root of 1.18

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