The declared rate of return compounded semi annually equivalent to the effective rate of return 10.25% per annum is:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 10% p.a.
Let the nominal rate convertible semi-annually be $r$.
Effective annual rate $=10.25\% = 0.1025$.
For semi-annual compounding:
$\left(1+\frac{r}{2}\right)^2 = 1.1025$
Taking square root:
$1+\frac{r}{2} = \sqrt{1.1025} = 1.05$
$\frac{r}{2} = 0.05$
$r = 0.10$
$r = 10\%$
final answer: $10\%$ per annum compounded semi-annually