Ask Question
24 November, 10:59

Barbara invested $12,300 at the Midtown Credit Union at 6% compounded monthly for 7 years. What is the effective rate of this investment? Round to the nearest hundredth of a percent

+1
Answers (1)
  1. 24 November, 11:29
    0
    Answer: the effective rate is 52.04%

    Explanation:

    the formula to calculate the future value with monthly compound interests is:

    FV = P[ 1+r/n] ^ (n*t)

    Where

    FV = Future value

    P = Principal or amount of money deposited

    r=annual interest rate in decimal form

    n = number of times compounded per year

    t = time in years

    We are only interested in the effective rate, so the relevant formula is:

    [ 1+r/n] ^ (n*t) so, we replace [ 1+0.06/12] ^ (12*7)

    [ 1+0.005] ^ (84) = 1.5204 we substract

    1 to get the effective rate 1.5204-1 and the effective rate is 52.04%
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Barbara invested $12,300 at the Midtown Credit Union at 6% compounded monthly for 7 years. What is the effective rate of this investment? ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers