Question

If the nominal rate of interest is 10% per annum and there is quarterly compounding, the effective rate of interest will be:
a. 10% per annum
b. 10.10 per annum
c. 10.25%per annum
d. 10.38% per annum​

Answer 1

Answer:

same a 10%

Explanation:

Answer 2

Given,

The nominal rate of interest is given as  10% per annum and there is quarterly compounding

To find,

The effective rate of interest.

Solution,

   For this sum, we have to calculate the effective rate of interest, the formulae for calculating this is

Formulae:     e =  $[1 + \frac{n}{m}] ^{m} - 1$

    Here, n denotes the nominal rate which is $10%$% and

             m denotes the compounding period which is $4$

e= $[1 + \frac{.10}{4}]^{4} -1$

 = $[\frac{4+.10}{4}]^4 - 1$

 = $[\frac{4.10}{4}]^{4} - 1$

=$\frac{282.5761}{256} -1$

= $\frac{26.5761}{256}$

= $.1038$

= $10.38$%

The answer is $10.38$per annum