Question

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

Answer 1

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

Step-by-step 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]{(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)