Statement An account pays a nominal 12%12\%12% per year with quarterly compounding. What is the effective annual rate? Solution ie=(1+im)m−1=(1+0.03)4−1i_e=\left(1+\dfrac{i}{m}\right)^{m}-1=(1+0{.}03)^{4}-1ie=(1+mi)m−1=(1+0.03)4−1. ie=1.125509−1=0.125509≈12.55%.i_e=1{.}125509-1=0{.}125509\approx\boxed{12{.}55\%}.ie=1.125509−1=0.125509≈12.55%.