If the nominal rate of interest is 6% per annum compounded monthly,what is the effective annual rate?
A)7.20%
B)6.60%
C)6.17%
D)6.00%

Question

Quizplus · Accepted Answer

The effective annual rate (EAR) can be calculated using the formula: EAR = (1 + i/n)^(n*t) - 1, where i is the nominal rate, n is the number of compounding periods per year, and t is the number of years. For a nominal rate of 6% compounded monthly, EAR = (1 + 0.06/12)^(12*1) - 1 = 0.0617 or 6.17%.

If the Nominal Rate of Interest Is 6% Per Annum