The effective rate equivalent to a normal rate of 8% per annum compounded semi annually is :
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → 8.16%
The effective Annual Interest Rate is,
$r_{eff}=\left(1+\frac{r}{n}\right)^n-1$
$=\left(1+\frac{0.08}{2}\right)^2-1$
$=1.0816-1$
$=0.0816=8.16\%$