Answer: a. 0.72 percentage points
Step-by-step explanation:
Given the following :
Nominal interest rate(r) = 11.85%) = 0.1185
c = number of compounding periods in a year
p = number of compounding periods rate is required for
Number of weeks in a year = 52 = p = c
Effective interest rate (E) is given as :
E = [( 1 + (r / c) )^p] - 1
E = [(1 + (0.1185 / 52)) ^52] - 1
E = [ (1 + 0.0022788) ^52] - 1
E = [1.0022788^52] - 1
E = 1.1256551 - 1
E = 0.1256551
Effective interest rate - Nominal interest rate
0.1256551 - 0.1185 = 0.0071551
(0.0071551 × 100)% = 0.7155% = 0.72%