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

To convert nominal rate to effective rate, the formula would be



where m is the number of periods in a year. Effective interest rate is usually expressed in % rate per year compounded yearly. The basis would be 1 year. Since there are 4 quarters in a year, m=4.



14.33% - 13.62% = 0.71%

Thus, the answer is D.

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