Question

Kim has money in a savings account that earns an annual interest rate of 4.1%, compounded monthly. What is the effective rate of interest on Kim's account? Round to the nearest hundredth of a percent.

Answer 1

monthly rate = .041/12 = .00341666..

let the effective annual rate be i

1 + i = (1 + .00341666..)^12
1+i = 1.0417783

i = .0417783 or

appr 4.18%

Answer 2

Thanks for the help and explanation!