The equivalent interest rate. Given: The nominal interest rate is 1.5\% per month.

Suman Cole

Suman Cole

Answered question

2021-08-15

The equivalent interest rate.
Given: The nominal interest rate is 1.5% per month.

Answer & Explanation

cheekabooy

cheekabooy

Skilled2021-08-16Added 83 answers

Calculation:
Converting 1.5% monthly to yearly.
i=x12 .........(I)
Here the interest rate annually is x and the interest rate monthly is i.
Substitute 1.5% for i in Equation (I).
1.5%=x12
x=18%
Hence 1.5% monthly interest rate is closest to 18% yearly.
Conclusion:
Thus, the correct option is (b) 18% effective interest per year.

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