What effective rate of interest is equivalent to a nominal rate of 19.214% compounded monthly?
A) 1.210%
B) 21.000%
C) 14.530%
D) 22.000%
E) 17.704%

Question

Quizplus · Accepted Answer

The effective rate of interest can be calculated using the formula for converting a nominal rate compounded monthly to an effective annual rate: $E = (1 + \frac{r}{n})^n - 1$, where $E$ is the effective annual rate, $r$ is the nominal annual rate, and $n$ is the number of compounding periods per year. Here, $r = 0.19214$ (or 19.214%) and $n = 12$. Plugging these values in, we get $E = (1 + \frac{0.19214}{12})^{12} - 1$, which simplifies to approximately 0.21 or 21% effective annual rate.

What Effective Rate of Interest Is Equivalent to a Nominal