Question

Find the effective rate of interest per annum equivalent to the nominal interest rate of 13.20% per annum compounded monthly.

14.03%


1.10%


1.58%


12.46%


0.011%

Answer 1

[AI-generated answer — Bot GPT 3.5]

The effective rate of interest per annum equivalent to a nominal interest rate of 13.20% per annum compounded monthly is 14.03%.

To calculate this, we need to use the formula for effective interest rate:

\(Effective Rate = (1 + (Nominal Rate/n))^n - 1\)

Where:
Nominal Rate = 13.20%
n = number of compounding periods per year (12 for monthly compounding)

Plugging in the values:

\(Effective Rate = (1 + (0.1320/12))^12 - 1\)
\(Effective Rate = (1 + 0.011)\)
\(Effective Rate = 1.0143\)

Multiply by 100 to get the percentage:
\(Effective Rate = 1.0143 * 100 = 14.03%\)

Therefore, the effective rate of interest per annum equivalent to a nominal interest rate of 13.20% per annum compounded monthly is 14.03%.