Question

if you could solve #9 and #10 it would be much appreciated

9. An interest rate of 10 % per month is closest to A. 12% per month effective rate B. 25% per quarter effective rate C 214% per year effective rate D None of the above John invested $1000 a year ago with a negotiated interest rate. He believes that his $1000 investment will become $1350 five years from now. John's negotiated interest rate is closest to? 10. 1350 1060 5% B 6% C. 7% D. 8% 2,7 (o zo

Answer 1

9) Effective rate = (1+0.1)^12 -1 = 1.1^12 -1 = 3.13842 - 1= 2.13842 = 2.14 = 214%

option C is correct

10. F = P *(1+i)^t

1350 = 1000 * (1+i)^6

(1+i)^6 = 1350 / 1000 = 1.35

1+i = 1.35^(1/6) = 1.051289

i = 1.0513 - 1 = 0.0513 = 5.13 % closest to 5%

option A is correct