a.
To find: The effective interest rate that has a nominal interest rate of 5%.
The effective interest rate is
Given:
Calculation:
Here,
Now put
Hence, the effective interest rate is
b.
To find: The effective interest rate that has a nominal interest rate of 10%.
The effective interest rate is
Given:
Calculation:
Here,
Now put
Hence, the effective interest rate is
c.
To compare: The effective interests in part (a) and part (b).
The effective interest rate in part (b) is
Given:
The effective interest rate in part (a) is
Calculation:
The ratio of the interest rates in part (a) and part (b) is,
So, the effective interest rate in part (b) is
d.
To solve: The ratio in part (c).
Given:
The effective interest rate in part (a) is
Calculation:
Consider the ratio,
On simplification, it follows that
Chapter 4 Solutions
Holt Mcdougal Larson Algebra 2: Student Edition 2012
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