You are currently earning 12% compounded semiannually.Your investment company is switching all accounts to daily compounding.What rate will give you the same effective annual rate of return as you are receiving now?
A) 10.83%
B) 10.97%
C) 11.66%
D) 11.89%

Question

Quizplus · Accepted Answer

The effective annual rate (EAR) for 12% compounded semiannually is calculated as (1 + 0.12/2)^2 - 1 = 12.36%. To find the equivalent daily compounding rate, solve (1 + r/365)^365 = 1.1236, which gives approximately 11.66%.

You Are Currently Earning 12% Compounded Semiannually