The effective annual rate of interest, which corresponds to a nominal rate of 6% per annum and is paid half-yearly, is:
A. 6.06%
B. 6.07%
C. 6.08%
D. 6.09%
Answer:D
The effective annual rate of interest, which corresponds to a nominal rate of 6% per annum and is paid half-yearly, is:
A. 6.06% B. 6.07% C. 6.08% D. 6.09%
Explanation: When a sum of Rs. 100 is compounded half-yearly, it becomes Rs. 100 x1 + 3/100 to the power 2= Rs. 106.09, with an effective rate of (106.09 - 100) percent = 6.09