Engineering Board Exam Reviewer · Nominal and Effective Rate of Interest · medium
Find the nominal rate compounded semi-annually that gives an effective annual rate of 8.16%.
- 8%
- 8.16%
- 7.8%
- 8.5%
Answer
A. 8%
Solution
≤ft(1+NR/2 )2-1=0.0816 1+NR/2=sqrt(1.0816)=1.04 NR=0.08=8%.
More Nominal and Effective Rate of Interest questions
- Find the effective rate of interest equivalent to a nominal rate of 5% compounded quarterly.
- Find the effective rate of interest equivalent to a nominal rate of 12% compounded monthly.
- Find the effective rate of interest equivalent to a nominal rate of 8% compounded quarterly.
- Find the effective rate of interest equivalent to a nominal rate of 10% compounded semi-annually.
- Find the nominal rate compounded monthly that is equivalent to an effective rate of 12.68%.
- A bank offers 6% compounded daily (assume 360 days/year). Find the equivalent effective annual rate.
- Given the same nominal rate, which compounding frequency yields a higher effective rate: monthly or quarterly?