Question

You invest $8,000 now and get $10,000 back in 8 years. (A) What nominal interest rate...

You invest $8,000 now and get $10,000 back in 8 years.

(A) What nominal interest rate convertible every four months did you earn?

(B) What nominal discount rate compounded monthly did you earn?

(C) What annual effective rate of discount did you earn?

Homework Answers

Answer #1

a)
PV = 8000
FV = 10000
Nper = 8 * 3 = 24
PMT = 0

Nominal interest rate can be calculated by using the following excel formula:
=RATE(nper,pmt,pv,fv)
=RATE(24,0,-8000,10000)*3
= 2.80%

Nominal interest rate = 2.80%

b)
PV = 8000
FV = 10000
Nper = 8 * 12 = 96
PMT = 0

Nominal discount rate can be calculated by using the following excel formula:
=RATE(nper,pmt,pv,fv)
=RATE(96,0,-8000,10000)*12
= 2.79%

c)
PV = 8000
FV = 10000
Nper = 8
PMT = 0

Annual effective rate can be calculated by using the following excel formula:
=RATE(nper,pmt,pv,fv)
=RATE(8,0,-8000,10000)
= 2.83%

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You invest $3,000 and earn $596 over 22 months. What nominal rate of annual interest (compounding...
You invest $3,000 and earn $596 over 22 months. What nominal rate of annual interest (compounding monthly) did you earn? (expressed as a percentage to two decimal places; don’t use the % sign)
What is the effective monthly interest rate for a loan with a 8% nominal annual interest...
What is the effective monthly interest rate for a loan with a 8% nominal annual interest rate if the loan is compounded (a) monthly, (b) daily, or (c) continuously? A friend offers you a loan at an effective daily interest rate of 0.2%. (a) What is the nominal (also known as the APR or Annual Percentage Rate) rate for this loan? (b) What is the effective annual interest rate for his loan? Show all work please
If a nominal interest rate compounded quarterly is 8%, what is the annual effective discount rate?...
If a nominal interest rate compounded quarterly is 8%, what is the annual effective discount rate? SHOW FORMULAS AND GET THUMBS UP
What is the nominal annual rate of interest compounded monthly on a lease valued at $23,700.00,...
What is the nominal annual rate of interest compounded monthly on a lease valued at $23,700.00, if payments of $6200.00 are made at the beginning of every six months for 2 years? The nominal annual rate of interest is ____​%. ​(Round to two decimal places as​ needed.)
Investment X for 100, 000 is invested at a nominal rate of interest, j, convertible semiannually....
Investment X for 100, 000 is invested at a nominal rate of interest, j, convertible semiannually. After four years, it accumulates to 214, 358.88. Investment Y for 100, 000 is invested at a nominal rate of discount, k, convertible quarterly. After two years, it accumulates to 232, 305.73. Investment Z for 100, 000 is invested at an annual effective rate of interest equal to j in year one and an annual effective effective rate of discount equal to k in...
Exercise IV (effective and nominal interest rate) a. The effective interest rate is 21.44%. If there...
Exercise IV (effective and nominal interest rate) a. The effective interest rate is 21.44%. If there are 12 compounding periods per year, what is the nominal interest rate? b. What is the effective interest rate on a continuously compounded loan that has a nominal interest rate of 25%? c. Which is the better investment, a fund that pays 20% compounded annually, or one that pays 18.5 % compounded continuously? d. Money invested at 6% per year, compounded monthly. How money...
An annuity immediate pays 200 every month for 10 years. Calculate the present value at the...
An annuity immediate pays 200 every month for 10 years. Calculate the present value at the following rates of interest: Annual effective interest rate of 6% Nominal interest rate convertible monthly of 8% Nominal rate of discount convertible once every two years of 4%
Sigmund deposits K at time t = 0. His balance (assuming no deposits or withdrawals) doubles...
Sigmund deposits K at time t = 0. His balance (assuming no deposits or withdrawals) doubles in six years. (a) What is the annual effective discount rate? (b) What is the nominal discount rate convertible bi-monthly (once every two months)? (c) What is the nominal interest rate convertible semi-monthly (twice per month)? (d) What is the nominal interest rate convertible once every two years? (e) What is the force of interest?
Y is placed in an account which caries a nominal annual interest rate of 2.4% compounded...
Y is placed in an account which caries a nominal annual interest rate of 2.4% compounded quarterly for the first 10 years and a nominal annual discount rate of 3.6% convertible monthly for the next 5 years. The value of this account 15 years after inception is $10000. Find Y
1. What is the effective rate of interest on a CD that has a nominal rate...
1. What is the effective rate of interest on a CD that has a nominal rate of 11.5 percent with interest compounded monthly? A.10.92% B.12.74% C.11.02% D.12.13% 2. You are considering buying a new car costing $15,000. You wish to pay $2,000 down payment and finance the rest with a 3-year loan at annual interest rate of 12%, to be paid back with monthly payments. What are your monthly car payments? A.$316.67 B.$352.34 C.$276.21 D.$385.78 E.$431.79
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT