Question

What is the effective rate of interest per semi-annual period equivalent to 8% p.a. compounding annually?

Answer 1

Effective rate of interest per semi-annual period equivalent to 8% p.a. compounding annually=

(1+R)^(1/t)-1

Where

R= interest rate per annum compounded annually (given as 8%) and t= number of times compounded a year (given as 2)

Plugging the inputs,

Effective rate of interest per semi-annual period= (1+8%)^(1/2)-1

=1.08^0.5-1 = 3.923048%