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2 October, 11:16

You are offered an investment with a quoted annual interest rate of 10% with monthly compounding of interest. What is your effective annual interest rate?

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  1. 2 October, 12:22
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    10.47%

    Explanation:

    Effective interest rate = (1 + i/n) ^n - 1

    i: Stated interest rate

    n: Number of compounding periods per year

    Effective annual interest = (1+10%/12) ^12 - 1

    = 10.47%
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