Calculate the Effective Annual Interest Rate If You Are Quoted

question 58

Multiple Choice

Calculate the effective annual interest rate if you are quoted 8% per annum,compounded half yearly.

• A) 8.27%
• B) 8.16%
• C) 8.0%
• D) 4.0%

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Definitions:

Discount

The reduction from the full amount or value of something, especially the price of a financial instrument or merchandise.

Coupon Rate

The annual interest rate paid by a bond as a percentage of the face value, indicating the income investors can expect to receive.

Interest Rates

The percentage of a sum of money charged for its use, often expressed as an annual percentage.

Premium

The amount paid for an insurance policy or an extra charge for an enhanced or optional service over and above the basic.