What is the effective annual interest rate for a nominal rate of 6% per year compounded semiannually?

Explanation

Assuming a principal amount of Rs 100, with a nominal annual interest rate of 6% compounded twice a year, the rate per half-year is 3%. Calculating the amount after one year: Rs 100 × (1 + 0.03)^2 = Rs 100 × 1.0609 = Rs 106.09. Therefore, the effective annual interest rate is 6.09%.