A. (1+r) c – 1
B. (2+r) c – 2
C. (3+r) c – 3
D. (1+r) c – 5
The formula and calculations are as follows: Effective annual interest rate = (1 + (nominal rate ÷ number of compounding periods)) ^ (number of compounding periods) – 1. For investment A, this would be: 10.47% = (1 + (10% ÷ 12)) ^ 12 – 1. And for investment B, it would be: 10.36% = (1 + (10.1% ÷ 2)) ^ 2 – 1.
Correct Answer: A. (1+r) c – 1 ✔
Last Updated: May 12, 2023