Determine the effective rate for $1 invested for 1 year at 4.5% compounded semiannually. The effective rate is %.

Truscelli3h

Truscelli3h

Answered question

2022-09-04

Determine the effective rate for $1 invested for 1 year at 4.5% compounded semiannually. The effective rate is %.

Answer & Explanation

Conner Singleton

Conner Singleton

Beginner2022-09-05Added 13 answers

To calculate effective interest rate, you use the following formula.
r = ( 1 + i / n ) n 1
where r is your effective rate, i is the rate as given in theproblem, and n is the number of compounding periods in one year.
So for this problem it would be:
r = ( 1 + .045 / 2 ) 2 1
r = 0.0455
r = 4.55%

Do you have a similar question?

Recalculate according to your conditions!

Ask your question.
Get an expert answer.

Let our experts help you. Answer in as fast as 15 minutes.

Didn't find what you were looking for?