Find the effective annual interest rate of 11% compounded monthly. Round your answer to the nearest 0.01%.
A) $r _ { \text {eff } } = 11.62 \%$
B) $r _ { \text {eff } } = 132.00 \%$
C) $r _ { \text {eff } } = 1.12 \%$
D) $r _ { \text {eff } } = 11.57 \%$
E) $r _ { \text {eff } } = 11.47 \%$

Question

Find the effective annual interest rate of 11% compounded monthly. Round your answer to the nearest 0.01%.  
A) $r _ { \text {eff } } = 11.62 \%$
B)   $r _ { \text {eff } } = 132.00 \%$
C)  $r _ { \text {eff } } = 1.12 \%$
D)  $r _ { \text {eff } } = 11.57 \%$
E)   $r _ { \text {eff } } = 11.47 \%$

Quizplus · Accepted Answer

The effective annual interest rate is given by the formula:$r _ { \text {eff } } = (1 + \frac { r } { n } ) ^ { n } - 1$where:$r$ is the nominal annual interest rate$n$ is the number of compounding periods per yearIn this case, the nominal annual interest rate is 11% and the number of compounding periods per year is 12 (since the interest is compounded monthly). Plugging these values into the formula, we get:$r _ { \text {eff } } = (1 + \frac { 0.11 } { 12 } ) ^ { 12 } - 1 = 0.1157$Rounding this to the nearest 0.01%, we get 11.57%.

Find the Effective Annual Interest Rate of 11% Compounded Monthly reff =11.62%r _ { \text {eff } } = 11.62 \%reff ​=11.62%

Find the Effective Annual Interest Rate of 11% Compounded Monthly $r _ { \text {eff } } = 11.62 \%$