Question

find the nominal annual rate of interest compounded monthly if $1200 accumulates to $1618.62 in years

Answer 1

Answer:

Nominal annual rate of interest(r) = 2.5% (Approx)

Explanation:

Given:

Present value (P) = $1,200

Future value (F) = $1,618.62.

Number of year = 1year = 12 months

Find:

Nominal annual rate of interest(r)

Computation:

Nominal annual rate of interest(r) = $\sqrt[12]{\frac{1,618.62}{1,200} }-1$

Nominal annual rate of interest(r) = $\sqrt[12]{1.34885}-1$

Nominal annual rate of interest(r) = 0.02525

Nominal annual rate of interest(r) = 2.5% (Approx)