Question

Effective Rate find the effective rate of interest corresponding to a nominal rate of 7.5% per year compounded.

Answer 1

Answer:

(A) 7.5 %

(B) 3.75 %

(C) 2.5%

(D) 0.625 %

Step-by-step explanation:

We have given effective rate of interest r = 7.5%

(a) Annual rate of interest will be equal to 7.5 %

(B) As we know that 1 year = 12 months

And interest is compounded semiannually

1 semiannual = 6 months

So semiannual rate of interest will be equal to $\frac{7.5}{2}=3.75$ %

(c) 1 quarter = 4 month

So number of period in an year = 3

So rate of interest quarterly $=\frac{7.5}{3}=2.5$ %

(D) Amount when amount is compounded monthly '

So number of period in an year = 12

So rate of interest $=\frac{7.5}{12}=0.625$ %