PRC-2 · Chapter 2 · Question 35 of 45
What is the effective annual rate (EAR) if the nominal rate is 12% compounded monthly?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) 12.68%
Explanation
Formula: (1 + r/m)^m - 1. Here, (1 + 0.12/12)^12 - 1 = (1.01)^12 - 1 ≈ 1.1268 - 1 = 12.68%.
More Coordinate System and Its Application MCQs
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- Q38How long will it take for a sum to double itself at 10% Simple Interest per annum?
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- Q40If you invest Rs. 1,000 at 5% interest compounded annually for 2 years, what is the Future Value (FV)?
- Q41What is 'Depreciation' in a financial context?