The effective annual interest rate is 15%. A) What is the effective interest rate for two years (accumulated over 2 years with interest over interest)? ((1+15%)^2)-1= 32.25% B) What is the effective interest rate for ten years (accumulated over 10 years with interest over interest)? ((1+15%)^10)-1= 304.56% C) Assume interest is compounded monthly. What is the monthly interest rate? (1+15%)^1/12)-1= 1.17% ^ This does not seem right to me? D) What is the simple annual interest rate? 15%*12= 180% ^I'm not sure about this either E) What is the simple interest rate for 2 years? For 10 years? 15%*2*12 ? 15%*10*12 ? ^ I thought these might be the correct equations but the answers don't make sense to me for simple interest
Below are the answers I got for this question but I am unsure if I am doing these the right way. If not, could you show me the correct equation to use?
- The effective annual interest rate is 15%.
A) What is the effective interest rate for two years (accumulated over 2 years with interest over interest)?
((1+15%)^2)-1= 32.25%
B) What is the effective interest rate for ten years (accumulated over 10 years with interest over interest)?
((1+15%)^10)-1= 304.56%
C) Assume interest is compounded monthly. What is the monthly interest rate?
(1+15%)^1/12)-1= 1.17%
^ This does not seem right to me?
D) What is the simple annual interest rate?
15%*12= 180%
^I'm not sure about this either
E) What is the simple interest rate for 2 years? For 10 years?
15%*2*12 ?
15%*10*12 ?
^ I thought these might be the correct equations but the answers don't make sense to me for simple interest
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