Question

when calculating a loans effective rate, if the interest compounds every two months, what value of n do you plug into your equation?
a. 2
b. 0.167
c. 6
d. 60

please select the best answer from the choices provided

a
b
c
d

Explanation:

Step1: Define compounding periods

$n$ = number of compounding periods per year.

Step2: Calculate periods per year

There are 12 months in a year. Compounding every 2 months:
$\frac{12}{2} = 6$

Answer:

c. 6