Seems like a specific question rather than a general one. Are you trying to test the forum or something....
Now why do so many people working in finance including one person who is the managing director of a large bank believe the answer is 106, because 12% pa is the same as 6% per half year, when after you have studied financial maths you know this is not the case
When te original guy told me the ammount he earned he clearly said effective rate, and I said if it's 106 then this implies the annual effective rate is greater than 12% and you can only work with interest rates in that fasion when they are nominal, when they are effective rates they need to be "decompounded" but he didn't want to hear it
May be we should teach him what an "effective interest rate" is. I don't know if I would have made the same mistake if I had not read CT-1!
Certainly when I was having a "conversation" with the bank manager they use simple interest during the month because it only accrues at the end of each month - hence using compound/effective interest in between would be wrong. However, I think the issue is that the managing director is most likely to have been an accountant which means he probably didn't study maths at Uni...
