Suppose the nominal rate is 10% per year and interest is compounded every two years. What is the effective annual rate?
A)4.88%
B)9.54%
C)10.25%
D)21%
E)44%,

Question

Quizplus · Accepted Answer

The effective annual rate (EAR) can be calculated using the formula: EAR = (1 + nominal rate/n)^n - 1, where n is the number of compounding periods per year. Here, n = 0.5 (since it's compounded every two years), so EAR = (1 + 0.10/0.5)^0.5 - 1 = 9.54%.

Suppose the Nominal Rate Is 10% Per Year and Interest