Question

a bank pays 6.25 % interest on monthly recurring deposit scheme. what is effective rate of interest?​

Answer 1

Effective rate of interest  = 6.43 % if a bank pays 6.25 % interest on monthly recurring deposit scheme.

Step-by-step explanation:

Rate of interest = 6.25 % per annum

= 6.25/12  % per month

Time = 1 Year   = 12  month

A = P (1 + R/100)ⁿ

A = P (1  + 6.25/1200)¹²

A = 1.0643P

Interest = 1.0643P - P

= 0.0643P

P * R * 1 /100 = 0.0643P

=> R = 6.43 %

Effective rate of interest  = 6.43 %

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Answer 2

Rate of interest = 6.25% per annum

= 6.25/12 % per month

Time = 1 Year = 12 month

${A = P(1+R/100}^{n}$

${A = P(1+6.25/1200)}^{12}$

A = 1.0643P

Interest = 1.0643P - P

= 0.0643P P* R * 1/100 = 0.0643P

=> R = 6.43%

Effective rate of interest = 6.43%