You agree to make 24 deposits of $500 at the beginning of each month into a...

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You agree to make 24 deposits of $500 at the beginning of each month into a...

You agree to make 24 deposits of $500 at the beginning of each month into a bank account. At the end of the 24th month, you will have $13,000 in your account. If the bank compounds interest monthly, what nominal annual interest rate will you be earning?

a. 7.62%

b. 8.00%

c. 8.40%

d. 8.82%

e. 9.26%

business finance

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Answer 1

Answer #1

Ans a. 7.62%

P =	Periodic payments
r =	rate of interest
n =	no of years

Future Value of Annuity Due =	(1 + r) * P ( (1 + r)ⁿ - 1 ) / r
13000 =	(1 + r%/12) * 500 * ((1 + r%/12)^24 - 1) / (r%/12)
r =	7.62%

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Answer 2

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