Annual effective

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December 17, 2014 at 2:33 pm #220991
6shahir
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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
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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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