Mathematics for FinancePYQ Dec 23Question 1251 of 512
All Questions

What is the effective rate of interest when principal amount 50,000\displaystyle 50,000 deposited in a nationalized bank for one year, corresponding to a nominal rate interest 8%\displaystyle 8\% per annum compounded quarterly [1.028=1.0824\displaystyle 1.02^8 = 1.0824]

Options

A10.48%\displaystyle 10.48\%
B8.08%\displaystyle 8.08\%
C8.16%\displaystyle 8.16\%
D8.24%\displaystyle 8.24\%
For any discrepancies in this question, email contact@cadada.in

Correct Answer

✅ Option d — 8.24%\displaystyle 8.24\%

All Options:

  • A10.48%\displaystyle 10.48\%
  • B8.08%\displaystyle 8.08\%
  • C8.16%\displaystyle 8.16\%
  • D8.24%\displaystyle 8.24\%

Detailed Solution & Explanation

**Derivation of Effective Rate of Interest** Given: - Nominal interest rate (r\displaystyle r) = 8%\displaystyle 8\% per annum - Compounding Frequency = Quarterly (m=4\displaystyle m = 4) **Step 1: Find the quarterly interest rate (i\displaystyle i)** i=rm=8%4=2%=0.02 per quarteri = \frac{r}{m} = \frac{8\%}{4} = 2\% = 0.02 \text{ per quarter} **Step 2: Calculate the effective annual interest rate (E\displaystyle E)** E=(1+i)m−1E = (1 + i)^m - 1 E=(1+0.02)4−1E = (1 + 0.02)^4 - 1 E=(1.02)4−1E = (1.02)^4 - 1 Using (1.02)4≈1.0824\displaystyle (1.02)^4 \approx 1.0824: E=1.0824−1=0.0824 or 8.24%E = 1.0824 - 1 = 0.0824 \text{ or } 8.24\% Hence, **Option D** is the correct answer.

More Questions from Mathematics for Finance

Ready to Master Mathematics for Finance?

Practice all 512 questions with instant feedback, earn XP, track your streaks, and ace your CA Foundation exam.

Start Practicing — It's Free