Royal Company holds a loan with an interest rate of 8.00% compounded semi-annually. Calculate the effective rate of the loan.

Effective Interest Rate = (1 + (Nominal Interest Rate / Number of Compounding Periods)) ^ Number of Compounding Periods - 1 In this case: Nominal Interest Rate = 8.00% (0.08 as a decimal) Number of Compounding Periods = 2 (semi-annually) Plug these values into the formula: Effective Interest Rate = (1 + (0.08 / 2))^2 - 1 Effective Interest Rate = (1 + 0.04)^2 - 1 Effective Interest Rate = (1.04)^2 - 1 Effective Interest Rate = 1.0816 - 1 Effective Interest Rate = 0.0816 To express the effective interest rate as a percentage, you can multiply by 100: Effective Interest Rate = 0.0816 * 100% = 8.16% So, the effective interest rate of the loan with an 8.00% nominal interest rate compounded semi-annually is approximately 8.16%.