An account pays interest at a nominal rate of 11% .Find the effecrive annual yield if interest is compounded monthly?
Nominal interest rate iii
Effective interest rate rrr
Compounded monthly nnn =12
r=(1+in)n−1r=(1+\frac{i}{n})^n-1r=(1+ni)n−1
=(1+0.1112)12−1=(1+\frac{0.11}{12})^{12}-1=(1+120.11)12−1
=(1.1157)12−1=0.1157×100=11.57%=(1.1157)^{12}-1=0.1157\times100=11.57\%=(1.1157)12−1=0.1157×100=11.57%
effective interest rate is 11.57%11.57\%11.57% per annum
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