Effective rate of interest corresponding to a nominal rate 3% per annum payable half yearly is

Answer 1

To calculate the effective rate of interest corresponding to a nominal rate of 3% per annum payable half yearly, you can use the formula:

Effective Rate = (1 + (Nominal Rate / Number of Compounding Periods))^Number of Compounding Periods - 1

In this case, the nominal rate is 3% per annum and it is payable half yearly, so the number of compounding periods is 2.

Let's calculate the effective rate:

Effective Rate = (1 + (0.03 / 2))^2 - 1
Effective Rate = (1 + 0.015)^2 - 1
Effective Rate = (1.015)^2 - 1
Effective Rate = 1.030225 - 1
Effective Rate = 0.030225 or 3.0225%

Therefore, the effective rate of interest corresponding to a nominal rate of 3% per annum payable half yearly is approximately 3.0225%.