The effective annual rate of interest corresponding to a nominal rate of 10% per annum payable half-yearly is:
Show answer & explanation
Correct answer: B
Explanation
The correct answer is Option 2 i.e. 10.25%.
Effective rate = [(1 + R/100)n - 1] × 100
= [(1 + 5/100)2 - 1] × 100
= [(21/20)2 - 1] × 100
= 10.25%