Effective Rate of Interest/Examples/Arbitrary Example 1

Example of Effective Rate of Interest

Let $\pounds 1000$ be invested for $2$ years at $8 \%$ per annum.

Let interest be compounded half-yearly.

The effective rate of interest is $8 \cdotp 16 \%$ per annum.

Proof

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Sources

• 1998: David Nelson: The Penguin Dictionary of Mathematics (2nd ed.) ... (previous) ... (next): interest
• 2008: David Nelson: The Penguin Dictionary of Mathematics (4th ed.) ... (previous) ... (next): interest