Find the declared rate of return compounded semiannually which is equivalent to 6% effective rate of return. [Use $(1.06)^{1/2}= 1.296$]
Answer & explanation
Correct answer: option 3
The correct answer is option (3) : 5.92%
Let declared rate of interest be r% p.a compounded half yearly
Given effective rate of return (per rupee) = $\frac{6}{100}=0.06$ (per-rupee)
P = 2 half years
$∴0.06=\left(1+\frac{r}{200}\right)^2-1$
On solving
r= 5.92
Hence, the declared rate of return = 5.92%