The effective rate that is equivalent to a nominal rate of 16% compounded semi-annually is : Option 1: 15.16% Option 2: 16.64% Option 3: 18.32% Option 4: 20.24%

Answer: 16.64%. Solution: Effective rate = (1 + r/m)^m - 1 with r = 0.16 and m = 2. So (1 + 0.08)^2 - 1 = 1.1664 - 1 = 0.1664 = 16.64%.

Applied Mathematics

Financial Mathematics

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applied

The effective rate that is equivalent to a nominal rate of 16% compounded semi-annually is :

15.16%

16.64%

18.32%

20.24%

✅ Correct Option: 2

Effective rate $= (1 + r/m)^m - 1$ with $r = 0.16$ and $m = 2$ . So $(1 + 0.08)^2 - 1 = 1.1664 - 1 = 0.1664 = 16.64\%$ .

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