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Nora deposited money into her savings account that is compounded annually at an interest rate of 4%. Nora thought the equivalent quarterly interest rate would be 3.5%.

Is Nora correct? If she is, explain why.

If she is not correct, state what the equivalent quarterly interest rate is and show how you got your answer.

Verified Answer :

MissPhiladelphia

Ni is not correct. To solve
the equivalent quarterly interest rate, the annual interest rate should be multiplied
by the correct ratio. Since the annual interest rate is 4% per year. So in 1 quarter
is equal to 0.25 year.

(4% / year) (0.25 year/ 1
quarter) = 1% per quarter

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