Question

3. A thousand dollars is invested for 7 months at an interest rate of 1% per month. What is the nominal interest rate per year

Answer 1

Nominal interest = 1%/month * 12month/1 year

nominal interest rate =12%/ year

Effective interest rate = (1+1%)^12-1 = (1+1/100)^12 -1 = 12.68%