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5 July, 10:25

g If I make a one-time deposit now of $1500 for 4 years, with an 8% nominal interest rate, compounded annually, what will be the effective interest rate?

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  1. 5 July, 10:39
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    8%

    Explanation:

    Effective interest rate = (1 + i / n) ^ n - 1

    = (1 + 8%/1) ^1 - 1 = 8%

    i: nominal interest rate

    n: number of compounding periods per year
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