If the compounding period is less than one year, the annual interest rate must be converted to the compounding period interest rate by dividing the annual rate by the number of compounding periods per year.

ECONOMIC DEVELOPMENT

Please wait while the activity loads.
If this activity does not load, try refreshing your browser. Also, this page requires javascript. Please visit using a browser with javascript enabled.

If loading fails, click here to try again

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

A	True
B	False
C	Either A or B
D	None of the above

Explanation:

Detailed explanation-1: -However, if compounding is more frequent than once per year, then the effective interest rate will be greater than 10%.

Detailed explanation-2: -Compound interest is calculated by multiplying the initial principal amount by one plus the annual interest rate raised to the number of compound periods minus one. The total initial amount of the loan is then subtracted from the resulting value.

Detailed explanation-3: -With monthly compounding, for example, the stated annual interest rate is divided by 12 to find the periodic (monthly) rate, and the number of years is multiplied by 12 to determine the number of (monthly) periods.

Detailed explanation-4: -Continuous Compounding of Interest If an annual interest rate compounds annually, then it should be compounded once a year. If an annual interest rate compounds semi-annual, then it should be compounded twice a year.

There is 1 question to complete.

ECONOMICS (CBSE/UGC NET)

ECONOMICS

ECONOMIC DEVELOPMENT