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The effective rate of interest corresponding to a nominal rate 3% p.a payable half yearly is (a) 3.2% p.a (b) 3.25% p.a (c) 3.0225% p.a (d) none of these . Can you explain?
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The effective rate of interest corresponding to a nominal rate 3% p.a ...
Effective Rate of Interest Calculation
To calculate the effective rate of interest, we need to consider the compounding frequency of the nominal rate. In this case, the nominal rate is 3% p.a payable half yearly.
Step 1: Calculate the half-yearly rate
Half-yearly rate = 3%/2 = 1.5%
Step 2: Calculate the effective rate of interest
Effective rate of interest = (1 + half-yearly rate)^2 - 1
= (1 + 1.5%)^2 - 1
= 3.0225%
Therefore, the effective rate of interest corresponding to a nominal rate 3% p.a payable half yearly is 3.0225% p.a. The answer is (c) 3.0225% p.a.
Summary
- Nominal rate = 3% p.a payable half yearly
- Half-yearly rate = 3%/2 = 1.5%
- Effective rate of interest = (1 + half-yearly rate)^2 - 1
- Effective rate of interest = (1 + 1.5%)^2 - 1 = 3.0225%
- Answer: (c) 3.0225% p.a.
To calculate the effective rate of interest, we need to consider the compounding frequency of the nominal rate. In this case, the nominal rate is 3% p.a payable half yearly.
Step 1: Calculate the half-yearly rate
Half-yearly rate = 3%/2 = 1.5%
Step 2: Calculate the effective rate of interest
Effective rate of interest = (1 + half-yearly rate)^2 - 1
= (1 + 1.5%)^2 - 1
= 3.0225%
Therefore, the effective rate of interest corresponding to a nominal rate 3% p.a payable half yearly is 3.0225% p.a. The answer is (c) 3.0225% p.a.
Summary
- Nominal rate = 3% p.a payable half yearly
- Half-yearly rate = 3%/2 = 1.5%
- Effective rate of interest = (1 + half-yearly rate)^2 - 1
- Effective rate of interest = (1 + 1.5%)^2 - 1 = 3.0225%
- Answer: (c) 3.0225% p.a.
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The effective rate of interest corresponding to a nominal rate 3% p.a payable half yearly is (a) 3.2% p.a (b) 3.25% p.a (c) 3.0225% p.a (d) none of these . Can you explain?
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