Find the total number of compounding periods and interest rate per period.
Terms investment: 6years, nomial rate: 18%, interest compounding :monthly, compounding period________, rate per period %_______
* i need to figure out the compounding period & rate per period%
18% compounded 12 times per year give
1.5% per month.
So, 6 years = 72 months.
To find the compounding period and the interest rate per period, we will use the information given.
1. Convert the given nominal rate to a decimal: 18% = 0.18.
2. Determine the total number of compounding periods over the investment period of 6 years. Since the interest is compounded monthly, we need to multiply the number of years (6) by 12 (months/year): 6 * 12 = 72 compounding periods.
Now, let's calculate the interest rate per period:
3. Divide the annual nominal rate (0.18) by the number of compounding periods in a year (12) to find the rate per period: 0.18 / 12 = 0.015.
4. Convert the rate per period to a percentage by multiplying by 100: 0.015 * 100 = 1.5%.
Therefore, for an investment of 6 years at a nominal rate of 18% with monthly compounding, the compounding period is 72 periods, and the rate per period is 1.5%.