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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. 6.09%

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

Explanation

A nominal rate of 6% payable half-yearly means 3% per half-year, applied twice annually. The effective annual rate is (1.03)^2 - 1 = 0.0609 = 6.09% per annum. The likely wrong choice is 6%, which is the nominal rate and ignores compounding during the second half-year.

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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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