What is the effective semiannual interest rate

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Reference no: EM131355854

You are comparing two investments. The first pays 1% interest per month, compounded monthly, and the second pays 6% interest per six months, compounded every six months.

(a) What is the effective semiannual interest rate for each investment?

(b) "What is the effective annual interest rate for each investment?

(c) On the basis of interest rate, which investment do you prefer? Does your decision depend on whether you make the comparison based on an effective six-month rate or an effective one-year rate?

Reference no: EM131355854

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