Answer:
Hence , the effective interest rate R = 0.0723 = 7.23 %
Step-by-step explanation :
Given as,
The Principal amount = $33,353
The stated interest rate (i) = 7% = 0.07
Number of compounding months (n) = 18
Now, The effective interest rate is calculated as ,
R = [tex]( 1 + \frac{i}{n} )^n[/tex] - 1
Or, R = ( [tex]( 1 + \frac{0.07}{18})^{18}[/tex] - 1
Or, R = [tex]( 1 + 0.388)^{18}[/tex] - 1
Or, R = 1.0723 - 1 = 0.0723
Hence , the effective interest rate R = 0.0723 = 7.23 % Answer
