Question

2. Jason wants his investment to triple in 6 years. If PNC bank in Mt. Pleat offers him an interest rate that will enable him achieve his goal, what is the nominal and effective interests offered by PNC?. Assuming the interest is compounded biweekly, Show your work. Every 2 weeks nomnal= ramai

Answer 1

Let i be the nominal interest rate.

Biweekly interest rate=r=i/26

Number of periods=n=6*26 =156

Let the invested amount be x then accumulated amount will be 3x.

Accumulated amount=x*(1+r)^n=x*(1+i/26)^156

We know accumulated amount is 3x

x*(1+i/26)^156=3x

(1+i/26)^156=3

i/26=3^(1/156)-1

i/26=0.00706724

i=0.18374824 or 18.37% (Nominal interest rate)

Effective interest rate=(1+r)^26=(1+0.18374824/26)^26-1=0.200937 or 20.09%