QCAA General Mathematics Loans, investments and annuities 1

Changing the nominal annual rate ($i$) directly alters the effective annual rate because it is the primary variable in the formula $EAR = (1 + \frac{i}{n})^n - 1$.

Changing when interest is charged implies altering the compounding frequency ($n$), which changes how often interest accumulates and thus changes the effective annual rate.

The effective annual rate is determined solely by the nominal interest rate and the compounding frequency; the amount repaid per period affects the loan balance or duration but does not change the underlying interest rate.

Changing the number of compounding periods per year ($n$) changes the effective annual rate, as more frequent compounding results in a higher effective rate for the same nominal rate.

This value corresponds to semi-annual compounding ($(1 + 0.0364/2)^2 - 1 \approx 3.67\%$), rather than the required quarterly compounding.

The effective annual rate is calculated using the formula $(1 + r/m)^m - 1$. Plugging in the values gives $(1 + 0.0364/4)^4 - 1 \approx 3.69\%$.

This is simply the nominal rate multiplied by two years ($3.64\% \times 2 = 7.28\%$), which ignores compounding entirely and does not represent an annual rate.

This represents the effective interest rate for the entire two-year period ($(1 + 0.0364/4)^8 - 1 \approx 7.52\%$), rather than the effective annual rate.