Question
answer of the effective annual rate of interest corresponding to a nominal rate of 6% per annum payable half -yearly is
Answers
Henry
P = Po(1+r)^n.
r = (6%/2)/100% = 0.03 = Semi-annual % rate expressed as a decimal.
n = 2comp./yr. * 1yr. = 2 Compounding
periods.
P = Po(1+0.03)^2 = Po*1.03^2 = 1.0609Po.
I = P-Po = 1.0609Po-Po = 0.0609Po.
I/Po * 100% = 0.0609Po/Po = 6.09% = Effective APR.
r = (6%/2)/100% = 0.03 = Semi-annual % rate expressed as a decimal.
n = 2comp./yr. * 1yr. = 2 Compounding
periods.
P = Po(1+0.03)^2 = Po*1.03^2 = 1.0609Po.
I = P-Po = 1.0609Po-Po = 0.0609Po.
I/Po * 100% = 0.0609Po/Po = 6.09% = Effective APR.