Complete question:
Don Krump wants to triple his investment in 6 years. An investment firm offers him an attractive interest rate. If the interest is compounded monthly, determine the nominal interest for this investment.
A. 20.09% B. 15.76% C. 18.45% D. 16.67%
Solution:
If inflation is taken into consideration, the nominal rate applies to the interest rate. Nominal may also apply, without consideration of any costs, to an announced or declared interest rate of a mortgage.
So, the nominal interest for this investment:
3P = P (1 + i) ^ 72
(1 + i) = 1.015375509
i = 0.015375509 per month
Nominal interest per year = 0.015375509 × 12
= 0.1845 or 18.45%