Calculate the effective annual rate for 19.2% compounded semi-annually.
A) 21.72%
B) 20.12%
C) 23.44%
D) 22.72%
E) 19.94%

Question

Quizplus · Accepted Answer

The effective annual rate (EAR) can be calculated using the formula: $(1 + \frac{r}{n})^n - 1$, where $r$ is the annual interest rate (expressed as a decimal) and $n$ is the number of compounding periods per year. For 19.2% compounded semi-annually, $r = 0.192$ and $n = 2$. Plugging these values into the formula gives: $(1 + \frac{0.192}{2})^2 - 1 = (1 + 0.096)^2 - 1 = 1.20192 - 1 = 0.20192$, or 20.12%.

Calculate the Effective Annual Rate for 19