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Sir, Could you please assist me with this question,
What is the effective annual rate of interest of 2.1% compounded every three months?
Options :
1)6.43%
2)8.40%
3)8.67%
4)10.87%
Sir, Is it 6.43% by using the formula r={1+i÷n}-1Why are you attempting a question for which you do not have an answer? You should be using a Revision Kit from one of the ACCA Approved Publishers – they have answers and
explanations 🙂The three monthly rate is 2.1%
Therefore the effective annual rate = (1.021^4) – 1
I do explain all of this in my free lectures on interest. The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well!
Sir, I have taken this question from one of the revision kits only, however, they had just shown the calculations but there were no explanations for this question, that’s why I have asked this question, Sir.
The answer is 8.67%, when I did it myself I got 6.43%, and now I have understood where I made the mistake.
Thank you very much for your response, Sir, and for providing free excellent lectures for ACCA students.
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