When interest is compounded more frequently than annually (e.g., half-yearly), the effective rate of interest is higher than the nominal annual rate. This is because the interest earned in the first period starts earning interest in the subsequent periods. Therefore, to achieve the same final amount Q from the same principal P in the same duration of 1 year, the annual rate of interest (S%) when compounded annually must be lower than the nominal annual rate (R%) when compounded half-yearly.