Question

An annuity written as a geometric series has r equal to 1.005 . Determine the annual interest rate for the annuity if the interest is compounded monthly

Answer 1

Basic equation, used where interest is compounded annually:\[A=P(1+r)^t\]

Answer 2

where t is the number of years (number of compounding periods), and r is the annual interest rate.

If interest is compounded n times per year, then \[A=P(1+\frac{ r }{ n})^{nt}\]

Answer 3

Now, in your math problem, the quantity inside the parentheses is 1.005. Using the above formula, find the annual interest rate, r, remembering that n=12 (monthly compounding).

Answer 4

Welcome to OpenStudy!

Answer 5

A=p(1+r/n) ^ nt this formula ?