Ask Question
27 June, 14:23

Which type of interest rate reflects the effects of compounding?

+2
Answers (1)
  1. 27 June, 14:40
    0
    It is called effective interest rate.

    For example, you invest in a bond wich pays 5% annual interest rate and it compounds semiannually.

    The first semester you win 2.5% over the capital invested and in the second semester you win 2.5% over the capital plus the interested earned in the first semester. Then the effecive interest rate is higher than 5%.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Which type of interest rate reflects the effects of compounding? ...” in 📗 Mathematics if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers