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.

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%