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7 February, 09:43

10. Joe borrowed $1000 and agreed to pay $1200 in settlement of the debt in 3 years and 3 months. What annual nominal rates compounded quarterly was charged on the debt?

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  1. 7 February, 10:04
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    Answer: 1.2%

    Step-by-step explanation:

    A = P (1 + r/n) ^nt

    A = final amount

    P = initial principal balance

    R = interest rate

    n = number of time interest per time period

    t = number of time period elapsed

    A = P (1 + r/n) ^nt

    1200 = 1000 (1 + r/4) ^ 4*15

    1200 = 1000 (1 + r/4) ^60

    1200 = 1000 (4 + r/4) ^60

    1200/1000 = (4+r/4) ^60

    1.2 = (4+r/4) ^60

    Take the 60 root of both sides

    1.0030433 = (4+r/4)

    4 * 1.0030433 = 4 + r

    4.01217 = 4 + r

    r = 4.01217 - 4

    r = 0.012 = 1.2%
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