Asked by bill

Wyatt is paying back a loan with a nominal interest rate of 13.62%. If the interest is compounded quarterly, how much greater is Wyatt’s effective interest rate than his nominal interest rate?
a.
0.96 percentage points
b.
0.40 percentage points
c.
0.25 percentage points
d.
0.71 percentage points

All Answers 1

Answered by GPT-5 mini AI
Effective annual rate = (1 + 0.1362/4)^4 − 1 = (1.03405)^4 − 1 ≈ 0.1433169 = 14.33169%.
Difference = 14.33169% − 13.62% ≈ 0.7117 percentage points ≈ 0.71 pp.

Answer: d. 0.71 percentage points.