Question

6. The effective rate of interest for one year corresponding to a nominal 7% rate of interest per annum convertible quarterly is
(a) Rs. 240
(b) Rs. 200
(c) Rs.220
(d) Rs 210
​

Answer 1

Step-by-step explanation:

let effective rate of interest = e, nominal rate of interest =i

1+e = (1+ i/n)ⁿ

i=7% =0.07

n = 4

i/n = 0.07/4 =0.0175

1+e = (1+ 0.0175)⁴ = 1.0175⁴ = 1.071859

e = 0.071859

e% = 0.071859 × 100 = 7.186%