CUET CUET Mathematics 2024 - For an investment, if the nominal rate of interest is 10 \% compounded half yearly, then the effective rate of interest is : | PYQs + Solutions | AfterBoards
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CUET Mathematics 2024

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Financial Math

Easy

For an investment, if the nominal rate of interest is 10%10 \% compounded half yearly, then the effective rate of interest is :

Correct Option: 1
Effective rate =(1+rn)n−1= \left(1 + \frac{r}{n}\right)^n - 1
Where: \newline - rr = nominal interest rate (as a decimal) \newline - nn = number of compounding periods per year
Given: \newline - Nominal rate = 10% = 0.10 \newline - Compounding = half-yearly, so n=2n = 2
Effective rate
=(1+0.102)2−1= \left(1 + \frac{0.10}{2}\right)^2 - 1
=(1+0.05)2−1= \left(1 + 0.05\right)^2 - 1
=(1.05)2−1= (1.05)^2 - 1
=1.1025−1= 1.1025 - 1
=0.1025= 0.1025
=10.25%= 10.25\%

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