Question : What is the effective annual rate of interest corresponding to a nominal rate of 10% per annum payable half-yearly?
Option 1: 10.25%
Option 2: 12.75%
Option 3: 9.25%
Option 4: 11.50%
Correct Answer: 10.25%
Solution :
Rate, $\frac{R}{2}$ = 10%
Time, $n$ = 1 year
Let principal sum, $P$ be INR 100.
When compounded half-yearly,
Amount = $P(1+\frac{\frac{R}{2}}{200})^{2n}$
= $100(1+\frac{10}{200})^{2}$
= $100(\frac{21}{20})^{2}$
= $\frac{441}{4}$
= INR 110.25
Effective rate = $\frac{110.25-100}{100}×100$
= 10.25%
Hence, the correct answer is 10.25%
Related Questions
Know More about
Staff Selection Commission Multi Tasking ...
Application | Cutoff | Selection Process | Preparation Tips | Eligibility | Exam Pattern | Admit Card
Get Updates BrochureYour Staff Selection Commission Multi Tasking Staff Exam brochure has been successfully mailed to your registered email id “”.