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