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An investment of $837.00 earned interest quarterly. If the balance after 7 years was $1251.24, what nominal annual rate compounded quarterly was charged?

An investment of $837.00 earned interest quarterly. If the balance after 7 years was $1251.24, what nominal annual rate compounded quarterly was charged?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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USE BA 2 PLUS CALCULATOR TO SOLVE PLEASE 

An investment of $837.00 earned interest quarterly. If the balance after 7 years was $1251.24, what nominal annual rate compounded quarterly was charged? The nominal annual rate of interest is %. (Round the final answer to four decimal places as needed. Round all intermediate values to six decimal places as needed.)
Transcribed Image Text:An investment of $837.00 earned interest quarterly. If the balance after 7 years was $1251.24, what nominal annual rate compounded quarterly was charged? The nominal annual rate of interest is %. (Round the final answer to four decimal places as needed. Round all intermediate values to six decimal places as needed.)
What is the nominal annual rate of interest compounded semi-annually at which $1520.00 will accumulate to $2935.51 in seven years and six months? The nominal annual rate of interest is %. (Round the final answer to four decimal places as needed. Round all intermediate values to six decimal places as needed.)
Transcribed Image Text:What is the nominal annual rate of interest compounded semi-annually at which $1520.00 will accumulate to $2935.51 in seven years and six months? The nominal annual rate of interest is %. (Round the final answer to four decimal places as needed. Round all intermediate values to six decimal places as needed.)
Expert Solution
Step 1: Solve part 1

Initial investment = $ 837

Future value = $ 1251.24

No of years = 7

Number of quarters = 7*4= 28

Find the quarterly rate,

Using the financial calculator enter

PV= -837

FV= 1251.24

N= 28

Press CPT

I/Y = 1.4463102587


Nominal annual rate = 4* 1.446310% = 5.7852%

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