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21 September, 14:47

Calculate the annual effective interest rate of a 12 % nominal annual interest rate compound monthly

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  1. 21 September, 15:36
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    12.683%

    Step-by-step explanation:

    The effective annual rate is given by ...

    (1 + r/n) ^n - 1

    where r is the nominal annual rate, and n is the number of compoundings per year. Filling in the given numbers, we have ...

    effective rate = (1 + 0.12/12) ^12 - 1 ≈ 0.12683 = 12.683%
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