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# Answer to Question #233749 in Civil and Environmental Engineering for Alan Enrico V Tuib

Question #233749
Jack deposited $500,000 into a bank for 6 months. At the end of that time, he withdrew the money and received$520,000. If the bank paid interest based on continuous compounding:
a. What was the effective annual interest rate?
b. What was the nominal annual interest rate?
1
2021-09-16T02:08:29-0400

"18\\%" compounded monthly

(a)

– interest rate per month: i ="18\\%\/12 = 1.5\\%"

– no. interest periods per year:"N = 12"

Suppose that you invest $500,000 for 6 months at 18% compounded monthly. "F= \\$500,000 (1 + i)^N = \\$500,000(1 + 0.015)^{12}" "= \\$1,195.60"

"i = 0.1956\u2014\u2014>19.56\\%"

(b)

Nominal Rate per Period:

r = 59.437024%

Rate per Compounding Intereval:

p = 92.5728374%

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