Answer:
Nominal annual rate of interest(r) = 2.5% (Approx)
Explanation:
Given:
Present value (P) = $1,200
Future value (F) = $1,618.62
Number of year = 5 year = 5(12) months = 60 months
Find:
The nominal annual rate of interest(r)
Computation:
[tex]Nominal\ annual\ rate\ of\ interest(r) = \sqrt[n]{\frac{F}{P} }-1 \\\\Nominal\ annual\ rate\ of\ interest(r) = \sqrt[60]{\frac{1,618.62}{1,200} }-1 \\\\Nominal\ annual\ rate\ of\ interest(r) = 0.004949\\\\Nominal\ annual\ rate\ of\ interest(r) = 0.5 %[/tex]
Actual periodic Nominal annual rate of interest(r) = 0.5 (5year)
Nominal annual rate of interest(r) = 2.5% (Approx)
