Which of the following represents the formula for calculating the effective annual return?

Explanation

The effective annual return is calculated using the formula: (1 + (nominal rate ÷ number of compounding periods)) raised to the power of the number of compounding periods, minus 1. For example, if the nominal rate is 10% compounded monthly, it is: (1 + (10% ÷ 12))^12 - 1 = 10.47%. Similarly, for a nominal rate of 10.1% compounded semi-annually, it is: (1 + (10.1% ÷ 2))^2 - 1 = 10.36%.