A bank pays interest semiannually with an EAR of 13%. What is the periodic interest rate...

A bank pays interest semiannually with an EAR of 13%. What is the periodic interest rate applicable semiannually?

A. 7.56%

B. 5.04%

C. 6.30%

D. 12.60%

Solutions

Expert Solution

(1 + Effective Annual Rate) = (1 + Semiannual Interest Rate)^2

1.13 = (1 + Semiannual Interest Rate)^2

1.0630 = 1 + Semiannual Interest Rate

Semiannual Interest Rate = 0.0630 or 6.30%

jeff jeffy answered 1 year ago

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