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An interest rate of 4.6% per annum is equivalent to an interest rate of1.15% per quarter0.35% per month0.17% per week0.17% per fortnight$0.39% per month

Question

An interest rate of 4.6% per annum is equivalent to:

  • 1.15% per quarter
  • 0.35% per month
  • 0.17% per week
  • 0.17% per fortnight
  • $0.39% per month
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Solution

The statement seems to be a bit confusing, but I'll try to clarify it.

An annual interest rate of 4.6% does not directly convert to the other rates mentioned without some form of compounding taken into account.

  1. If we simply divide the annual rate by 4 (for 4 quarters in a year), we get 1.15% per quarter.
  2. If we divide the annual rate by 12 (for 12 months in a year), we get approximately 0.383% per month, not 0.35%.
  3. If we divide the annual rate by 52 (for 52 weeks in a year), we get approximately 0.088% per week, not 0.17%.
  4. If we divide the annual rate by 26 (for 26 fortnights in a year), we get approximately 0.177% per fortnight, not 0.17%.
  5. The last statement seems to be a repetition of the monthly rate, but with a different value. As mentioned before, the monthly rate would be approximately 0.383%, not 0.39%.

Please note that these calculations are based on simple interest, not compound interest. The rates would be different if the interest is compounded quarterly, monthly, weekly, or fortnightly.

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