alleryThe interest rate per period in CI when annual rate is 12% compounded quarterly is
A4%
B12%
C6%
D3%
Answer & Solution
Correct answer: D. 3%
1. Quarterly compounding means 4 periods per year.
2. Rate per period = annual rate divided by number of periods.
3. 12% / 4 = 3% per quarter.
4. So the periodic rate is 3%.
_Source: ICAI BoS Foundation Paper 3, Ch 4 'Math of Finance', p.9_
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