Question 10 Find the effective rate corresponding to nominal rate 6% / year comp
ID: 3440980 • Letter: Q
Question
Question 10
Find the effective rate corresponding to nominal rate 6% / year compounded monthly. Round the answers to the nearest hundredth of percent.
A.
6.538%
B.
5.858%
C.
6.598%
D.
6.168%
Question 11
Find the interest rate needed for an investment of $4,000 to grow to an amount of $5,000 in 4 yr if interest is compounded continuously. Please round the answer to the nearest hundredth of percent.
A.
5.58 %/yr
B.
5.70 %/yr
C.
6.63 %/yr
D.
5.01 %/yr
E.
5.92 %/yr
Question 12
Anthony invested a sum of money 6 yr ago in a savings account that has since paid interest at the rate of 7%/year compounded quarterly. His investment is now worth $19,713.77. How much did he originally invest? Please round the answer to the nearest cent.
A.
$13,000.01
B.
$12,500.01
C.
$14,000.01
D.
$11,500.01
E.
$11,000.01
Question 13
Georgia purchased a house in 1998 for $220,000. In 2003 she sold the house and made a net profit of $50,000. Find the effective annual rate of return on her investment over the 5-yr period. Please round the answer to the nearest tenth of percent.
A.
3.7%/yr
B.
3.1%/yr
C.
4.4%/yr
D.
4.2%/yr
E.
5.6%/yr
Question 14
Find the amount of an ordinary annuity of 10 yearly payments of $1,800 that earn interest at 10% per year, compounded annually.
A.
$4,668.74
B.
$28,687.36
C.
$87,798.04
D.
$3,600.00
Question 15
Robin, who is self-employed, contributes $4,000/year into a Keogh account. How much will he have in the account after 15 years if the account earns interest at the rate of 6.5%/year compounded yearly?
A.
$96,728.68
B.
$10,287.36
C.
$158,267.14
D.
$3,771.28
A.
6.538%
B.
5.858%
C.
6.598%
D.
6.168%
Explanation / Answer
10.
Let R = the effective rate.
Thus,
1 + R = (1+r/n)^n
here, r = 0.06, n = 12 (monthly).
Thus,
1 + R = (1+0.06/12)^12 = 1.061677812
1 + R = 1.061677812
R = 0.061677812
R = 6.168% [ANSWER, OPTION D]
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