# 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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