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The effective rate of interest equivalent to the nominal rate of 7% converted monthly : (a) 7.26% (b) 7.22% (c) 7.02% (d) 7.20%?
Most Upvoted Answer
The effective rate of interest equivalent to the nominal rate of 7% co...
Solution:
To determine the effective rate of interest equivalent to the nominal rate of 7% converted monthly, we need to use the following formula:
Effective rate of interest = (1 + (nominal rate/m))^m - 1
Where,
m = number of compounding periods per year
nominal rate = stated annual interest rate
In this case, the nominal rate is 7% and the compounding period is monthly, which means that m = 12.
Now, let's plug in the values:
Effective rate of interest = (1 + (7%/12))^12 - 1
= (1 + 0.00583333)^12 - 1
= 1.00583333^12 - 1
= 1.076 - 1
= 0.076 or 7.6%
Therefore, the effective rate of interest equivalent to the nominal rate of 7% converted monthly is 7.6%.
Answer: (None of the options provided are correct. The correct answer is 7.6%)
Note: It is important to note that the options provided in the question are not correct. The closest option to the correct answer is (b) 7.22%, but it is still not correct. Therefore, it is important to always double-check the options provided in the question and calculate the answer independently to avoid any errors.
To determine the effective rate of interest equivalent to the nominal rate of 7% converted monthly, we need to use the following formula:
Effective rate of interest = (1 + (nominal rate/m))^m - 1
Where,
m = number of compounding periods per year
nominal rate = stated annual interest rate
In this case, the nominal rate is 7% and the compounding period is monthly, which means that m = 12.
Now, let's plug in the values:
Effective rate of interest = (1 + (7%/12))^12 - 1
= (1 + 0.00583333)^12 - 1
= 1.00583333^12 - 1
= 1.076 - 1
= 0.076 or 7.6%
Therefore, the effective rate of interest equivalent to the nominal rate of 7% converted monthly is 7.6%.
Answer: (None of the options provided are correct. The correct answer is 7.6%)
Note: It is important to note that the options provided in the question are not correct. The closest option to the correct answer is (b) 7.22%, but it is still not correct. Therefore, it is important to always double-check the options provided in the question and calculate the answer independently to avoid any errors.
Community Answer
The effective rate of interest equivalent to the nominal rate of 7% co...
Effective rate = (1+i)^ñ-1. ×100
(1+.07/12)^12-1 ×100
b) 7.22%
(1+.07/12)^12-1 ×100
b) 7.22%
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The effective rate of interest equivalent to the nominal rate of 7% converted monthly : (a) 7.26% (b) 7.22% (c) 7.02% (d) 7.20%?
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The effective rate of interest equivalent to the nominal rate of 7% converted monthly : (a) 7.26% (b) 7.22% (c) 7.02% (d) 7.20%? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about The effective rate of interest equivalent to the nominal rate of 7% converted monthly : (a) 7.26% (b) 7.22% (c) 7.02% (d) 7.20%? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The effective rate of interest equivalent to the nominal rate of 7% converted monthly : (a) 7.26% (b) 7.22% (c) 7.02% (d) 7.20%?.
The effective rate of interest equivalent to the nominal rate of 7% converted monthly : (a) 7.26% (b) 7.22% (c) 7.02% (d) 7.20%? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about The effective rate of interest equivalent to the nominal rate of 7% converted monthly : (a) 7.26% (b) 7.22% (c) 7.02% (d) 7.20%? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The effective rate of interest equivalent to the nominal rate of 7% converted monthly : (a) 7.26% (b) 7.22% (c) 7.02% (d) 7.20%?.
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