Question

how to calculate effective interest rate under compound interest?​

Answer 1

Answer:

Effective annual interest rate = (1 + (nominal rate / number of compounding periods)) ^ (number of compounding periods) - 1.

For investment A, this would be: 10.47% = (1 + (10% / 12)) ^ 12 - 1.

And for investment B, it would be: 10.36% = (1 + (10.1% / 2)) ^ 2 - 1.

Answer 2

Answer:

Step-by-step explanation:

Effective annual interest rate = (1 + (nominal rate / number of compounding periods)) ^ (number of compounding periods) - 1.

For investment A, this would be: 10.47% = (1 + (10% / 12)) ^ 12 - 1.

And for investment B, it would be: 10.36% = (1 + (10.1% / 2)) ^ 2 - 1.