Question

Compute the interest rate at which $500 per month payments should grow to accumulate savings of $50,000 in 3 years. Payments are made at the end of each month. (Note: Round your answer to two decimal places.)

EFFECT

DISC

RATE

NOMINAL

	A	B
1	Data	Description
2	NPER	3 x 12 = 36
3	PMT	500
4	PV	0
5	FV	50,000
6	[Type]	0
7	Interest Rate	=
8		= %

Compute the stated interest rate on a promotional credit card if the effective interest rate is 8.0%. Assume that interest is compounded (a) semi-annually and (b) quarterly. (Note: Round your answers to two decimal places.)

NOMINAL

RATE

EFFECT

DISC

	A	B
1	Data	Description
2	Compounded semi-annually
3	Interest Rate	=
4		= %
5	Compounded quarterly
6	Interest Rate	=
7		= %
8

Compute the actual interest rate paid or earned on a mortgage loan if the bank states that the nominal rate is 10%, and the interest is compounded (a) semi-annually and (b) quarterly. (Note: Round your answers to two decimal places.)

EFFECT

DISC

RATE

NOMINAL

	A	B
1	Data	Description
2	Compounded semi-annually
3	Interest Rate	=
4		= %
5	Compounded quarterly
6	Interest Rate	=
7		= %
8

Answer 1

1.
=RATE(12*3,-500,0,50000,0)*12=62.37328%

2.
Semi-annually=(1+8%/2)^2-1=8.16%

Quarterly=(1+8%/4)^4-1=8.24%

3.
Semi-annually=(1+10%/2)^2-1=10.25%

Quarterly=(1+10%/4)^4-1=10.38%