The effective rate per annum equivalent to a nominal rate of 8% compounded semi-annually is
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 8.16% **
Nominal rate = 8% per annum compounded semi-annually.
Semi-annual rate = $\displaystyle \frac{8}{2} = 4\% = 0.04$
Effective annual rate:
$\displaystyle (1+0.04)^2 - 1$
$= 1.0816 - 1$
$= 0.0816$
Effective rate = 8.16% per annum