Question

What is the nominal rate of interest compounded monthly at which payments of $200 made at the end of every three months accumulate to $9200 in eight years?

Show the financial calculator (BA II Plus) steps with values so I can see how to do the question as they need just the financial calculations for the midterm (and timeline if needed).

Answer 1

A	B	C	D	E	F	G	H	I
2
3		Future Value	$9,200
4		Quarterly Payment	$200
5		Period	8	Years
6		Number of quarters	32
7		Since payment is quarterly, therefore, the quarterly interest rate will be calculated first,
8		then the monthly interest rate is calculated using the quarterly interest rate.
9
10		To calculate the rate of return, enter the following data in the financial calculator:
11		FV	$9,200	=D3
12		N	32	=D6
13		PMT	($200.00)	=-D4
14		PV	$0	0
15		After entering the above values, press I/Y to calculate the quarterly rate of return.
16
17		Quartely Rate of return	2.23%	=RATE(D12,D13,D14,D11)
18
19		Let monthly rate of return be r then
20		(1+r)3 = (1+2.3%)
21		solving the above equation,
22		Monthly interest rate, r=	0.74%	=((1+D17)^(1/3))-1
23
24		Nominal rate of interest compounded monthly	=12*Monthly interest rate
25			8.86%	=12*D22
26
27		Hence Nominal rate of interest compounded monthly	8.86%
28