Answer:
The higher interest rate is 0.3% monthly rather than 0.7% quarterly
Explanation:
Equivalent Rates of Interest
Rates of interest are related to time. If we are given a specific monthly rate r, it can be found an equivalent rate in another time base. But it depends on the type of interest we're working with (simple or compound)
If we have a r=0.3% per month, we can find the equivalent quarterly rate by simply multiplying by 3, if the investment is made on the simple interest type. In this case r = 0.3%*3 = 0.9% quarterly.
If we are working with compound interest, the equivalent rate is more complicated to find
(1+r)=(1+0.003)^3=1.0009003
We find
[tex]r=0.009003*100=9.003\%[/tex]
In both cases, the higher interest rate is 0.3% monthly rather than 0.7% quarterly
The interest rate that is higher in comparison would be:
0.3% monthly
Given that,
Interest rate per month = 0.3%
Interest rate per quarter = 0.7%
If we calculate the annual interest for monthly and quarterly rate, it will be:
Monthly
No. of months in a year = 12
Monthly rate = 0.3%
So,
Annual Interest = 0.3 × 12
= 3.6%
Quarterly
No. of quarters in a year = 4
Quarterly rate = 0.7%
So,
Annual Interest = 0.7 × 4
= 2.8%
Since 3.6 is greater than 2.8, thus, 0.3% monthly is higher.
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