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    Techboy Rahul
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    The document discusses the calculation of effective annual interest rate when interest is compounded annually. It provides an example where the principal is Rs. 100, number of compounding periods per year is 12, and annual interest rate is 12%. With annual compounding, the effective annual rate is calculated to be 12.68% and the interest earned after 1 year is Rs. 12.36 when the principal is Rs. 100 at the start.

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    The document discusses the calculation of effective annual interest rate when interest is compounded annually. It provides an example where the principal is Rs. 100, number of compounding periods per year is 12, and annual interest rate is 12%. With annual compounding, the effective annual rate is calculated to be 12.68% and the interest earned after 1 year is Rs. 12.36 when the principal is Rs. 100 at the start.

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    13 views3 pages

    Others 1680513360795

    Uploaded by

    Techboy Rahul
    The document discusses the calculation of effective annual interest rate when interest is compounded annually. It provides an example where the principal is Rs. 100, number of compounding periods per year is 12, and annual interest rate is 12%. With annual compounding, the effective annual rate is calculated to be 12.68% and the interest earned after 1 year is Rs. 12.36 when the principal is Rs. 100 at the start.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    of 3

    Tenure = n 1 yrs

    No. of Compoundings per year m 12


    Annual rate of Interest i 12% p.a.

    Effective Annual Rate EAR 12.68%


    Annual Compounding

    Principal Amount remaining invested (Years) Tenure (Years)


    100 100.00 0.5
    106 106.00 0.5
    Total 1.00
    Initial Invested 100.00
    Annual Rate of Interest 12.00%

    Interest Earned AccumulatedAmount


    6.00 106.00
    6.36 112.36
    12.36

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