The equivalent interest rate. Given: The nominal interest rate is 1.5\% per month.

Suman Cole 2021-08-15 Answered
The equivalent interest rate.
Given: The nominal interest rate is \(\displaystyle{1.5}\%\) per month.

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Expert Answer

cheekabooy
Answered 2021-08-16 Author has 26183 answers
Calculation:
Converting \(\displaystyle{1.5}\%\) monthly to yearly.
\(\displaystyle{i}={\frac{{{x}}}{{{12}}}}\) .........(I)
Here the interest rate annually is x and the interest rate monthly is i.
Substitute \(\displaystyle{1.5}\%\) for i in Equation (I).
\(\displaystyle{1.5}\%={\frac{{{x}}}{{{12}}}}\)
\(\displaystyle{x}={18}\%\)
Hence \(\displaystyle{1.5}\%\) monthly interest rate is closest to \(\displaystyle{18}\%\) yearly.
Conclusion:
Thus, the correct option is (b) \(\displaystyle{18}\%\) effective interest per year.
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