Question

Calculate the effective annual rate of compound interest equivalent to $8\%$ per annum compound interest paid half yearly.

Answer 1

Effective annual rate of interest
$=4+4{(1+\frac{4}{100})}^1$
$=4+4.16$
$=8.16$% per annum
[for half year the interest is $4\%$ and for next half year the interest will be $4.16\%$]