Question

For the following annuity due, determine the nominal annual rate of interest.

Future Value-
Present Value$4.200
Periodic Rent$380
Payment Period 1 year 15 years Conversion Period quarterly
The nominal annual rate of interest is __ %
(Round to two decimal places as needed.)

Answer 1

The nominal annual rate of interest for the given annuity due is 10%.

Step-by-step explanation:

The nominal annual rate of interest can be calculated using the formula:

Rate = ((Future Value - Present Value) / (Present Value))^(1 / Number of Periods) - 1

Applying this formula to the given annuity due:

Rate = (($4200 - $380) / $380)^(1 / (4 * 15)) - 1

Rate = ($3820 / $380)^(1 / 60) - 1

Rate = 10%