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The effective rate that is equivalent to a nominal rate of 10% compounded semi-annually is : |
10.5% 11.75% 10.25% 12.35% |
10.25% |
The correct answer is Option (3) → 10.25% A nominal rate of 10% compounded semi-annually is, $\frac{10\%}{2}=5\%=0.05$ Effective Annual Rate = $\left(1+\frac{0.10}{2}\right)^2-1$ $=(1.05)^2-1$ $=0.1025=10.25\%$ |
