Question

Don Krump wants to triple his investment in 6 years. An investment firm offers him an attractive interest rate.
If the interest is compounded monthly, determine the nominal interest for this investment.

a) 20.09% b) 15.76% c) 18.45% d) 16.67%

Answer 1

Answer:

c) 18.45%

Explanation:

The RATE formula is applied which is shown in the attachment.

The NPER reflects the time period.  

Mentioned that,  

Present value = $1

Future value or Face value = $3

PMT = $0

NPER = 6 years × 12 months = 72 months

The formula is shown below:  

= Rate(NPER;PMT;-PV;FV;type)  

The present value come in negative  

So, the nominal interest rate is

= 1.54% × 12 months

= 18.48% approx