The effective rate of return equivalent to a nominal rate of 12% per annum compounded quarterly is: [Given that: $(1.03)^4=1.1255$]

12.55%

The correct answer is Option (2) → 12.55%

Given nominal rate: 12% per annum compounded quarterly

Quarterly rate: 12% / 4 = 3% = 0.03

Effective annual rate (EAR):

$\text{EAR} = (1 + 0.03)^4 - 1$

Given: $(1.03)^4 = 1.1255$

Therefore:

$\text{EAR} = 1.1255 - 1 = 0.1255 = 12.55\%$