Find the effective rate of return equivalent to declared rate of 12% compounded monthly.
[Use $(1.06)^2=1.1236, (1.03)^4=1.1255$ and $(1.01)^2= 1.1268, e^{0.12}= 1.1275$]
Answer & explanation
Correct answer: option 3
The correct answer is option (3) : 12.68%
Given r = 12% p.a
P = 12 months
So, effective rate (per rupee) $=\left(1+\frac{12}{1200}\right)^4-1$
$= (1.01)^{12}-1$
$= 1.1268-1$
Hence, effective rate $= 0.1268 ×100$%
= 12.68%