An interest rate of 12% a year is the same as 6% for 2 months.

Question

Quizplus · Accepted Answer

Assuming a 365-day year, the calculation for converting an annual interest rate to a monthly rate is:
(1 + annual rate)^(1/12) - 1

Using this formula, we can find that an annual rate of 12% is equivalent to a monthly rate of approximately 0.009866%.
To find the equivalent rate for 2 months, we need to compound the monthly rate twice:
(1 + 0.009866%)^2 - 1

This gives us an effective rate of approximately 0.01978%, which is equivalent to an annual rate of approximately 2.388%.

Therefore, an interest rate of 12% a year is not the same as 6% for 2 months, making the answer B (False).

An Interest Rate of 12% a Year Is the Same