Question

compute the nominal rate of interest for the following ordinary simple annuity.

future value= $3200.00

periodic rent= $732.00

payment interval= $1 year

term= 4 years

conversion period= annually

Answer 1

# of periods of annuity, NPER Periodic rent, PMT Present value, PV Future value, FV Periodic compounding type, TYPE Nominal rate of interest of given annuity 4 $732.00 $3,200.00 0 0 if ordinary annuity; 1 if ordinary due 5.95% [Ref: NOTE NOTE Nominal rate of interest of given annuity is calculated using EXCEL FUNCTION RATE(nper,pmt,pv,fv,type) where nper 4; pmt-732.00; pv-0.00; pmt--3200; fv-0; type 0; Here, value for pmt is positive as it denotes cash inflow; fv is negative as it denotes cash inflow; type 0 as it is an ordinary annuity. of periods of annuity, NPER 2 Periodic rent, PMT 3 Present value, PV 4 Future value, FV 5 Periodic compounding type, TYPE 6 | Nominal rate of interest of given annuity S732.00 $o.oo $3,200.oo OEO if ordinary annuity: 1 if ordinary due -RATE(Bl,B2,B3,-B4,B5) [Ref: NOTE]