Posted by **Viktor** on Thursday, March 27, 2008 at 6:12pm.

Interest of 12% per year compounded monthly is roughly equivalent to an interest rate of 12.68% per year compunded yearly when using the formula: A=p(1+r/n)^nt

If you solve the problem the two are equal; how can you derive 12.68% compounded yearly from 12% per year compounded monthly?

- Investing -
**Reiny**, Thursday, March 27, 2008 at 9:17pm
Let the rate compounded yearly be i

then (1+i)^1 = (1+.12/12)^12

1+i = 1.01^12

1+i = 1.126825

i = .1268..

so the annual rate is 12.68%

- Investing -
**Viktor**, Thursday, March 27, 2008 at 10:09pm
Thank you very much, that was most helpful.

## Answer This Question

## Related Questions

- calculus - the monthly payment that amortizes a loan of A dollars in t yr when ...
- simple interest and compund interest. - 1) What is the final amount when $3000 ...
- math - Suppose that you have $12,500 to invest over a 4 year period. There are ...
- Math - Using the formula. I =Prt ,calculate the simple interest where t=1/n and ...
- Math - you deposit $1000 at 3% per year.what is the balance at the end of one ...
- Math - you deposit $1000 at 3% per year.what is the balance at the end of one ...
- Maths - Get Rich Quick Investments LTD offers 2 investment schemes. Scheme 1: ...
- Engineering Economics - Hi there, I am having some trouble solving this problem...
- math - Each year, Cathy invests $1,200 in her account. The account pays an ...
- Math - If interest is compounded monthly at 8% per year for 10 years, explain ...

More Related Questions