What is the annual interest rate of an investment that pays 9.2% annual interest compounded quarterly?

Question

What is the annual interest rate of an investment that pays 9.2% annual interest compounded quarterly?

Answer 1

After 1 year each dollar is worth (1+.092/4)⁴ = 1.095222948, and so the equivalent simple interest rate is

.095222948 or 9.5222948%

Answer 2

Effective Annual Interest Rate = [(1 + r/n)ⁿ - 1]*(100%)

 

Where r is the annual interest rate expressed as a decimal, and n is the number of times per year the interest is compounded.  For this problem, r = 0.092 and n  = 4:

 

Effective Annual Interest Rate = [(1 + 0.092/4)⁴ - 1]*(100%)

 

Effective Annual Interest Rate = [1.09522 - 1]*(100%) = 9.522%

 

So compounding increases the interest rate from 9.2% to over 9.5%.

Answer 3

It means Simple interest rate.

 

 ( 1 + 0.092/4) ^4= 1.095

 

  9.5 compound