Question

When the interest is compounded quarterly, there are four conversion periods in a year and the quarterly rate will be

• A. one-third of the annual rate
• B. one-fourth of the annual rate
• C. three-fourth of the annual rate
• D. two times the annual rate

Answer 1

Answer: (B)

one-fourth of the annual rate

As the compound is compounded quarterly, i.e. $4$ parts; rate is divided into quarters, quarterly rate being $\frac{1}{4}$th of the annual rate.