+598 Compute the nominal annual rate of interest compounded monthly at which $400 paid at the end of the month for eight years accumulates to $45,000.
Any help with steps would be greatly appreciated.
Thanks
Compute the nominal annual rate of interest compounded monthly at which $400 paid at the end of the month for eight years accumulates to $45,000.
Any help with steps would be greatly appreciated.
The nominal rate compounded monthly for a monthly payment of $400 to grow to $45,000 in 8 years is=3.91%
This TVM formula is used for this particular problem:400=45000[ r / ((1 + r)^96 - 1)]
In this problem you would solve for r, or the interest rate per month. Unfortunately, I don't know of a DIRECT solution for r in this problem. Iteration and interpolation can be used to find r.
