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NEW QUESTION: 1
The semiannually compounded rate is 10% quoted on an annualized basis. The equivalent annually compounded rate is:
A. 9.65%
B. 10.1%
C. 10.5%
D. 10.25%
Answer: D
Explanation:
Explanation/Reference:
Explanation:
To solve such problems, think about investing a dollar for a year. The final amount should be the same under both the quotations. Under annually compounded rate, r, $1 grows to 1+r in 1 year. Under semiannual compounding, it grows to (1+0.1/2)