Effective Rate Find the effective rate of interest corresponding to a nominal rate of 8.25% par year compounded (a) annually, (b) semiannually, (c) quarterly, and (d) monthly.

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aristeus aristeus · Answer 1 · 2020-01-15T06:35:56+01:00

Answer:

(a) 8.25%

(b) 4.125%

(c) 2.75%

(d) 0.6875%

Step-by-step explanation:

We have given annual rate of interest r = 8.25 %

(A) Annual rate of interest will be 8.25 %

(B) Semiannual rate of interest

For semiannual number of period [tex]=\frac{12}{6}=2period[/tex]

So rate of interest semiannual will be [tex]=\frac{8.25}{2}=4.125[/tex]%

(c) Quarterly so number of period [tex]=\frac{12}{4}=3period[/tex]

So rate of interest semiannual will be [tex]=\frac{8.25}{3}=2.75[/tex]%

(d) For monthly number of period [tex]=\frac{12}{1}=12period[/tex]

So rate of interest semiannual will be [tex]=\frac{8.25}{12}=0.6875[/tex]%