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    Exam Name: ECBA
    Vendor: Entry Certificate in Business Analysis (ECBA)

    60 Questions & Answers
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    The semiannually compounded rate is 10% quoted on an annualized basis. The equivalent annually compounded rate is:
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    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)

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    2 = 1.1025. Since these two should be equal, we get 1+r
    1.1025, giving r = 10.25%. Note that the annually compounded rate must be larger than the semiannually rate, ruling out 9.65 automatically.

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