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bigduckontax, Accountant
Category: Tax
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# Please could you calculate the AER effective rate assuming

### Customer Question

Please could you calculate the AER effective rate assuming your recieve 3% paid semi annually? I have the answer as 6.09 but when entering on a calculator the answer states otherwise so obviously I am doing something wrong. thanks.
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Please advise the initial amount invested, the terminal value and the number of years involved. With this information I can assist you.
Customer: replied 1 year ago.

Hi

this is a question provided by my tutor.

So no initial amount invested has been provided but this would be for 1 year.

The formula provided for the calculation of interest is the following:

AER = (1+periodic rate)n-1

n = number of compounding periods in the year

Does that help? The answer provided is below yet when I input into calculator i get a different answer

Semi-annual compounding:

AER= (1+0.03)2-1

AER= (1.03)2-1

AER= 0.0609

AER= 6.09%

Expert:  bigduckontax replied 1 year ago.
CalculatorSoup comes out with exactly the same figure so you would appear to be correct. You can find their calculator here:
http://www.calculatorsoup.com/calculators/financial/effective-annual-rate-calculator.php
I do hope that I have been of assistance.
Customer: replied 1 year ago.

Thank you. the formula is explained as I already know but entering that on my calculator still provides the incorrect answer. maybe the mode is incorrect.

best

Expert:  bigduckontax replied 1 year ago.
Delighted to have been of assistance.
Please be so kind as to rate me before you leave the Just Answer site.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 2850
Experience: FCCA FCMA CGMA ACIS
Expert:  bigduckontax replied 1 year ago.

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