Answer:
The periodic interest rate from June 3 to July 2 will be 2.08%
Step-by-step explanation:
Given:
Annual percentage rate = 25%
Time period = June 3 to July 2
To Find:
Periodic interest rate =?
Solution:
The periodic interest rate r is calculated using the following formula:
[tex]r = (1 + \frac{i}{m})^{\frac{m}{n}} - 1[/tex]
Where,
i = nominal annual rate
n = number of payments per year i.e., 12 for monthly payment, 1 for yearly payment and so on.
m = number of compounding periods per year
The period interest rate per payment is integral to the calculation of annuity instruments including loans and investments.
Now substituting the values we get
[tex]r = (1 + \frac{25}{12})^{\frac{12}{12}} - 1[/tex]
[tex]r = (1 + \frac{25}{12})^1 - 1[/tex]
[tex]r = (1 +2.083 ) - 1[/tex]
[tex]r = (3.083 ) - 1[/tex]
[tex]r = 2.083 \%[/tex]
