Answer:
Chan is not correct.
The correct equivalent quarterly interest rate is 1.3108% per quarter.
Step-by-step explanation:
Given that Chan deposited money into his retirement account.
The interest was 7% compounded annually.
Let P be the amount invested and F the final amount got after 1 year
If compounded annually,
F = P(1+0.07) = 1.07P
If compounded quarterly, no of quarters = 4
F = [tex]P(1+\frac{7}{100} )^4[/tex]
= 1.3108P
Hence equivalent interest rate = 1.3108% and not 2%
