What will be the effective annual rate of compound interest of 7% per annum payable half yearly is:

7% 7.9% 7.343% 7.1225%

7.1225%

Rate of interest half yearly = \(\frac{7}{2}\) = 3.5% Effective rate of interest = x% + x% + \(\frac{x\;×\;x}{100}\)%                                    = 3.5 + 3.5 + \(\frac{3.5\;×\;3.5}{100}\)                                    = 7 + 0.1225 = 7.1225%