Find the effective rate corresponding to the given nominal rate. Round your answers to three decimal places.
6% / year compounded monthly
_____%

6% / year compounded daily
_____%

A) 6.183%, 6.136%
B) 6.168%, 6.183%
C) 6.136%, 6.000%
D) 6.183%, 6.000%

Question

Find the effective rate corresponding to the given nominal rate. Round your answers to three decimal places. ​
6% / year compounded monthly
​  _____%
​
6% / year compounded daily
​  _____%
​
A) 6.183%, 6.136% 
B) 6.168%, 6.183% 
C) 6.136%, 6.000% 
D) 6.183%, 6.000%

Quizplus · Accepted Answer

For monthly compounding:
Effective rate = (1 + 0.06/12)^12 - 1 = 0.061837 or 6.184% (rounded to 3 decimal places)

For daily compounding:
Effective rate = (1 + 0.06/365)^365 - 1 = 0.061677 or 6.168% (rounded to 3 decimal places)

Therefore, the answer is B.

Find the Effective Rate Corresponding to the Given Nominal Rate