Ross land has a loan of $8,500 compounded quarterly for four years at 4 %.what is the effective interest rate for the loan?

The effective interest rate for the loan is 4.30%.

Step-by-step explanation:

Consider the provided information.

The loan is $8500 which compounded quarterly for 4 years at 4%.

Annual rate is 0.04 and number of period is 4yr

Period interest rate (R) =

Compounding  periods = n = 4 Comp./yr. × 4yrs = 16

The formula for calculating Future value is:

Substitute PV = 8500, R = 0.01, n = 16 in above formula,

Now calculate interest per year.

Now substitute the respective values in the above formula..

interest per year

Now APR can be calculated as

APR = 366.75/8500 = 0.0430 = 4.30%

Hence, the effective interest rate for the loan is 4.30%.