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The effective rate that is equivalent to a nominal rate of 12% compounded semiannually is : |
12.42% 13.51% 12.36% 10.04% |
12.36% |
The correct answer is Option (3) → 12.36% To calculate the effective rate equivalent to a nominal rate 12% compounded is, $EAR=\left(1+\frac{r}{n}\right)^n-1$ $=\left(1+\frac{0.12}{2}\right)^2-1$ $=(1.06)^2-1=0.1236$ $EAR=12.36\%$ |
