Find the effective rate corresponding to the given nominal rate. Round your answers to three decimal places.
6% / year compounded monthly
_____%

6% / year compounded daily
_____%

Question

Find the effective rate corresponding to the given nominal rate. Round your answers to three decimal places. ​
6% / year compounded monthly
​  _____%
​
6% / year compounded daily
​  _____%
​

Quizplus · Accepted Answer

For monthly compounding:
Effective rate = (1 + 0.06/12)^12 - 1 = 0.061837 or 6.184% (rounded to 3 decimal places)

For daily compounding:
Effective rate = (1 + 0.06/365)^365 - 1 = 0.061677 or 6.168% (rounded to 3 decimal places)

Therefore, the answer is B.

Find the Effective Rate Corresponding to the Given Nominal Rate