Convert 8.25% quoted on a semi- annually compounded money market basis for USD to the equivalent annually- compounded bond basis.
A) 8.30%
B) 8.52%
C) 8.54%
D) 8.69%

Question

Quizplus · Accepted Answer

To convert from a semi-annually compounded rate to an annually compounded rate, use the formula: (1 + r/n)^(n*t) - 1, where r is the nominal rate, n is the number of compounding periods per year, and t is the number of years. For 8.25% semi-annual, the equivalent annual rate is (1 + 0.0825/2)^2 - 1 = 8.54%.

Convert 825% Quoted on a Semi- Annually Compounded Money Market Basis