SOLUTION: a sum of money was invested for 2 1/2 years. In the first year,it earns 15%interest, the second yar 13% and 12% for the last half year. find the nominal rate compounded every 6 mo
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Question 1116387: a sum of money was invested for 2 1/2 years. In the first year,it earns 15%interest, the second yar 13% and 12% for the last half year. find the nominal rate compounded every 6 months would give the same maturity value at the end of second an half years.
Answer by greenestamps(13198) (Show Source): You can put this solution on YOUR website!
The growth factor the first year was 1.15; the second year it was 1.13. For the next half year it was 1.06. So the overall growth factor was 1.15*1.13*1.06 = 1.37747.
We want to find a constant annual rate x that would produce the same growth factor in 2.5 years if compounded every 6 months -- that is, for which
The rate we are looking for is about 13.23%.
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