Answer:
Effective monthly interest rate = 0.982%
Nominal annual interest rate = 11.74 %
Effective annual interest rate = 11.78%
Explanation:
A = P*(1 + r/100)ⁿ
Where n is time period in years, and r is the yearly interest rate
12*93.12 = 1000*(1 + 0.01r)¹
1117.44/1000 = 1 + 0.01r
1.1174 = 1 + 0.01r
0.01r = 1.1174 - 1
r = 0.1174/0.01 = 11.74 %
Nominal annual interest rate = 11.74 %
Monthy interest rate = annual interest rate/months in a year
Monthy interest rate = 11.74/12
Nominal monthy interest rate = 0.978%
Effective monthly interest rate = (1 + monthly interest rate/12)¹² - 1
Effective monthly interest rate = (1 + 0.00978/12)¹² - 1
Effective monthly interest rate = (1 + 0.00978/12)¹² - 1
Effective monthly interest rate = (1.000815)¹² - 1
Effective monthly interest rate = 1.00982 - 1
Effective monthly interest rate = 0.982%
Effective annual interest rate = Effective monthly interest*months in a year
Effective annual interest rate = 0.982*12
Effective annual interest rate = 0.982*12
Effective annual interest rate = 11.78%
