Nominal rate of interest
I
Refers to a rate of interest that has been annualized
without taking compounding into account.
I
Interest of 4% per 0.5 year is expressed as an annual rate
of 8%. But it is equivalent to
(
1
+
4
%)(
1
+
4
%)

1
=
8
.
16
%
I
In this case, we say:
8% is the annual nominal rate of interest convertible (or
payable, or compounded) semiannually
I
notation:
i
(
2
)
=
0
.
08
()
i
(
2
)
2
per
1
2
year effective
()
1
+
i
(
2
)
2
2

1 per year effective
am
m
fEteantr
ti
GET
TECHE
I