Find the effective rate corresponding to the given nominal rate. (Ro.pdf
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The document provides a method to calculate the effective interest rate from a nominal rate of 7% compounded monthly. Using the formula i(t) = (1+(r/n))^(nt), the calculation yields an effective rate of approximately 7.23%. The answer is rounded to the nearest hundredth of a percentage point.
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Find the effective rate corresponding to the given nominal rate. (Ro.pdf
- 1. Find the effective rate corresponding to the given nominal rate. (Round your answer to the nearest hundredth of a percentage point.) 7%/year, compounded monthly ? Solution I(t) = (1+(r/n))^(nt) Where I = annual rate, r = nominal rate, n = number of times compounded per year, t = years I(t) = (1+ (.07/12))^(12*1)= 1.07229 Effective rate = 7.23%