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The effective annual rate of interest corresponding to a nominal rate of 6% per annum payable half yearly is:_______?

Correct answer: D. Rs 6.09%

  • A. Rs 6.06%
  • B. Rs 6.07%
  • C. Rs 6.08%
  • D. Rs 6.09%

Explanation

A nominal rate of 6% payable half-yearly gives 3% per half-year, with two periods in one year. The effective annual rate is (1.03)^2 - 1 = 0.0609 = 6.09%. Students may choose 6.06% by adding the two half-year rates without including interest on the first half-year's interest.

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Percentages express a quantity as parts per hundred and support calculations involving increases, decreases, discounts, commissions, taxes, and successive changes. Questions require distinguishing percentage change from percentage points and identifying the original value when a final value and its percentage change are given.

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