The effective annual rate of interest corresponding to a nominal rate of 6% per

Question

The effective annual rate of interest corresponding to a nominal rate of 6% per annum payable half yearly is:

Options:

A . Rs 6.06%

B . Rs 6.07%

C . Rs 6.08%

D . Rs 6.09%

Answer: Option D

Let the sum be Rs 100.
Then
P = Rs 100, R = 3 %
per half “ year, t = 2 half “ years
Amount = Rs [100 Ã— (1 + 3/100)2]
= Rs (100 Ã— 103/100 Ã— 103/100)
= Rs 10609/100 = Rs 106.09
Effective Annual Rate = 6.09%

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