Asked by Shailee Woods on May 19, 2024
Verified
If a $5,000 investment grew to $6,450 in 30 months of monthly compounding, what effective rate of return was the investment earning?
Monthly Compounding
An interest calculation method where the accrued interest is added to the principal sum every month, leading to an increase in the amount of subsequent interest accruements.
Effective Rate
The actual interest rate earned or paid on an investment or loan, taking into account the compounding of interest.
- Understand and calculate the effective rate of interest for various compounding frequencies.
- Calculate the time required for investments to grow to a certain amount under different compounding terms.
Verified Answer
IS
Learning Objectives
- Understand and calculate the effective rate of interest for various compounding frequencies.
- Calculate the time required for investments to grow to a certain amount under different compounding terms.