An investor can invest money with a particular bank and earn a stated interest rate of 15.40%; however, interest will be compounded quarterly. What are the nominal, periodic, and effective interest rates for this investment opportunity?

Answer:Nominal rate = 15.40%, Periodic rate = 3.85% and effective interest rate = 16.31%Step-by-step explanation:An investor can invest money and earn a stated interest rate = 15.40%We have to find the nominal, periodic and effective interest rates for this investment.Nominal rate = Stated interest rate is also called annual percentage rate or nominal interest rate. Therefore nominal interest rate = 15.40%.Periodic interest rate = Periodic interest rate is the annual interest rate divided by number of compounding periods.Periodic rate = ( [tex]\frac{15.40}{4}[/tex] ) = 3.85%Effective interest rate = We have to calculate Effective interest rate (EAR)  by the formula =  [tex]EAR=[(\frac{1+i}{n})^{n}-1][/tex]where i = rate of interest and n = number of compounding periods[tex]EAR=[(1+\frac{0.154}{4})^4]-1[/tex][tex]EAR=[(1+.0385)^{4}]-1[/tex][tex]EAR=[(1.0385)^{4}]-1[/tex]EAR = 1.1631 - 1EAR = 0.1631 = 16.31%Therefore, Nominal rate = 15.40%, Periodic rate = 3.85% and effective interest rate = 16.31%