Chan deposited money into his retirement account that is compounded annually at an interest rate of 7%. Chan thought the equivalent quarterly interest rate would be 2%. Is Chan correct? If he is, explain why. If he is not correct, state what the equivalent quarterly interest rate is and show how you got your answer. (8 pts)

No, equivalent quarterly rate will be approx 1.75%

Step-by-step explanation:

Given that Chan deposited money into his retirement account that is compounded annually at an interest rate of 7%.

We know that there are 4 quarters in 1 year.

So to find that equivalent quarterly we will divide given yearly rate by number of quarters.

That means divide 7% by 4.

which gives 1.75%.

But that is different than Chan's though of 2% quarterly interest.

Hence Chan is wrong.