If the nominal interest rate is 12% per year compounded monthly, then the effective interest rate per six-months will be m equal to 1+ r m -1, where OA. r= 12% and m = 12; OB. r= 1% and m = 12; OC. r= 6% and m = 6; D. r= 6% and m = 2; O E. r= 1% and m = 6;
If the nominal interest rate is 12% per year compounded monthly, then the effective interest rate per six-months will be m equal to 1+ r m -1, where OA. r= 12% and m = 12; OB. r= 1% and m = 12; OC. r= 6% and m = 6; D. r= 6% and m = 2; O E. r= 1% and m = 6;
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:If the nominal interest rate is 12% per year compounded monthly, then the effective interest rate per six-months will be
m
r
(¹+)"
m
equal to 1+
- 1, where
OA. r= 12% and m = 12;
OB. r= 1% and m = 12;
OC. r= 6% and m = 6;
O D. r= 6% and m = 2;
O E. r= 1% and m = 6;
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Step 1
Given:
Interest rate = 12%
Compounding =Monthly
Want effective rate for 6 months.
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