dont understand this compound interest question

can some1 guide me through this

Find the effective rate of interest.

11.75% compounded monthly

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- Nov 18th 2010, 05:21 PMmath321compound interest
dont understand this compound interest question

can some1 guide me through this

Find the effective rate of interest.

11.75% compounded monthly - Nov 18th 2010, 06:46 PMRobb
The amount is stated in a nominal yearly rate, which is compounded 12 times a year..

The effective monthly rate is simply;

$\displaystyle i_{12}=\frac{0.1175}{12}=0.009791667$

So assuming you wanted the annual effective rate of interest, which is where the monthly effective rate is compounded 12 times;

$\displaystyle i=\left(1+\frac{0.1175}{12}\right)^{12}-1=12.4039\%$ - Nov 18th 2010, 06:57 PMmath321
so what am i going to solve for

what do i do from here - Nov 18th 2010, 08:08 PMWilmer