Which of the following is the effective annual rate of interest corresponding to a compound interest rate of 9% per annum compounded half-yearly?
Show answer & explanation
Correct answer: C
Explanation
Annual interest rate = 9%
Half-yearly compound interest rate = 9% ÷ 2 = 4.5%
= (1 + 4.5/100)² − 1
= (1.045)² − 1
= 1.092025 − 1
= 0.092025
= 9.20%