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The effective rate that is equivalent to a nominal rate of 12% compounded quaterly is : |
10.55% 12.55% 12.25% 11.55% |
12.55% |
The correct answer is Option (2) → 12.55% To calculate the effective annual rate (EAR), $EAR=\left(1+\frac{r}{n}\right)^n-1$ $=\left(1+\frac{0.12}{4}\right)^4-1$ $=(1.03)^4-1$ $=0.1255$ $=12.55\%$ |
