III IC-28 Practice Questions - III IC-28 Foundation Of Actuarial Science Exam

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Which of the following is the correct formula for the effective annual rate of interest (i) corresponding to a nominal rate of interest (i^(m)) compounded m times a year?

i = (1 + i^(m)/m)^m - 1 i = (1 + i^(m)/m)^m + 1 i = (1 - i^(m)/m)^m - 1 i = (1 + i^(m))^m - 1

Correct Answer:

i = (1 + i^(m)/m)^m - 1

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