Question

Question 3

If money is invested for 3 years, the per annum simple interest rate equivalent to a nominal rate of 12.5%p.a compounding monthly is (as a percentage rounded to three decimal places; don’t use % sign):

Answer 1

we can fin the rate using following formula

Amount x Simple interest Rate X 3 = Amountx(1+r%)^n - Amount

here r = rate of interest = 12%/12 = 1%

n = no of compounding period = 3*12 = 36

Amount x Simple interest Rate X 3 = Amountx(1+1%)^36 - Amount
Amount x Simple interest Rate X 3 = Amount(1.01)^36- Amount
Amount x Simple interest Rate X 3 = 1.43(Amount)- Amount
Amount x Simple interest Rate X 3 = 0.43Amount
Simple Interest rate = 0.43Amount/3 Amount
Simple interest rate = 0.14333
i.e 14.33%