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Math Help - effective interest rate

  1. #1
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    effective interest rate

    Calculate the effective interest rate corresponding to 12% per annum, compounding:
    • Semiannually semi
    • Quarterly
    • Monthly
    • Daily
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  2. #2
    Super Member

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    Hello, nisoo-1!

    Calculate the effective interest rate corresponding to 12% per annum, compounding:

    * Semiannually
    * Quarterly
    * Monthly
    * Daily

    \begin{array}{cccccccc}<br />
& & & & & & & \text{Eff. Interest Rate} \\<br />
\text{Semiannually} & \left(1 + \frac{12\%}{2}\right)^2 & \quad= &\quad (1.06)^2 & = & 1.1236 & \quad & 12.36\% \\<br />
\text{Quarterly} & \left(1 + \frac{12\%}{4}\right)^4 & \quad= &\quad (1.04)^4 & = & 1.12550881 & & 12.55\% \end{array}
    . . \begin{array}{cccccccc}\text{Monthly} & \left(1 + \frac{12\%}{12}\right)^{12} & = & (1.01)^{12} & = & 1.12682503 & &\;\; 12.68\% \\<br />
\text{Daily} & \quad\left(1 + \frac{12\%}{365}\right)^{365} & = & \left(1 + \frac{0l12}{365}\right)^{365} & = & 1.127474616 & \quad & \;\;12.75\% \\\end{array}

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