An interest rate is quoted as 8% per annum compounded daily.What is the effective annual rate?
A)8.33%
B)8.00%
C)8.30%
D)8.28%

Question

Quizplus · Accepted Answer

The effective annual rate is given by the formula (1 + r/n)^n - 1, where r is the annual interest rate and n is the number of compounding periods per year. In this case, r = 8% and n = 365 (since the interest is compounded daily), so the effective annual rate is (1 + 0.08/365)^365 - 1 = 8.328%, which is closest to choice A.

An Interest Rate Is Quoted as 8% Per Annum Compounded