Which of the following equations correctly shows the relation between the semi- annual rate (s) and the annual rate (R)?
A) 1 + s = 2(1 + R)
B) (1 + s)2 = 1 + R.
C) (1 + s)2 = 1 + R
D) 2(1 + s) = 1 - R.

Question

Quizplus · Accepted Answer

The equation (1 + s)2 = 1 + R is the correct formula for compounded semi-annually. The left side of the equation represents the semi-annual interest rate being compounded twice a year, while the right side represents the annual interest rate. Therefore, choice B is the correct equation that shows the relation between the semi-annual rate and the annual rate.

Which of the Following Equations Correctly Shows the Relation Between