The Effective Yield Is the Annual Rate I That Will $i = \left( 1 + \frac { r } { n } \right) ^ { n } - 1$

question 46

Multiple Choice

The effective yield is the annual rate i that will produce the same interest per year as the nominal rate compounded n times per year. For a rate that is compounded n times per year, the formula for effective yield is given as $i = \left( 1 + \frac { r } { n } \right) ^ { n } - 1$ . Find the effective yield for a nominal rate of 10%, compounded monthly. Round your answer to two decimal places.

• A)1.05%
• B)10.71%
• C)11.10%
• D)1.61%
• E)10.47%

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