Answer to Question #320314 in Finance for anna

Question

The interest rate for the loan is 5.6% p.a. effective. Calcualte the equivalent nominal annual rate compounding monthly. Give your answer as a percentage to 4 decimal places, and do NOT include a percentage sign.

Answer 1

The nominal interest rate is calculated as:

$r=m[(1+i)^{\frac{1}{m}}-1]$

i = 5.6%

m = 12

$\therefore r=12[(1+5.6\%)^{\frac{1}{12}}-1]$

$r=5.4612$