Find the effective rate of return equivalent to declared rate of 12% compounded semiannually.
[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 2
The correct answer is option (2) : 12.36%
Given r = 12% p.a
P = 2 half year
So, effective rate (per rupee) $=\left(1+\frac{12}{200}\right)^2-1$
$= (1.06)^2-1$
$= 0.1236$
Hence, effective rate $= 0.1236 ×100$%
= 12.36%