Confused with this question especially with what to do with the "expense charge"? Can anyone help?
A fund earns interest at the nominal rate of 8% compounded quarterly. At the end of each quarter, just after interest is credited, an expense charge equal to 0.4% of the fund is withdrawn. Determine the annual effective rate realized by the fund.
Thank you!!
After $1$ quarter, an initial unit of money, after deduction of "expense charge" becomes $ 1.02\times\frac{99.6}{100}$
Raising the above to a power of $4$ yields a figure of $\approx 1.0652$
Thus the effective annual interest rate $\approx 6.52\%$