Originally Posted by

**krzyrice** I need help with how to calculate nominal annual rate.

**1)** A sum of $850 is invested for 10 years and the interest is compounded quarterly. There is $1000 in the account at the end of 10 years. What is the nominal annual rate?

So to set this up is the equation:

1000 = 850(1+r/4)^(4*10) and we solve for r? I don't know if that equation is correct. But when I solve for it the answer comes out to be 0.0163 or 1.63%. Please confirm with me if that answer is correct.

**2)** An investment grows by 3% per year for 10 years. By what percent does it increase over the 10-year period?

Is the formula: P(1 + 0.03/1)^(1*10) and we are trying to find the effective rate. So should the *answer* be 34.39%?

**3)** If the balance, M, at time t in years, of a bank account that compounds its interest payments monthly is given by

M = M0(1.07763)^t

Note: In the M0, the 0 is a subscript.

What is the nominal annual rate?

Again I need help with nominal annual rate. In the back of the book it says the nominal annual rate is 7.5%. But I do not get how to find that answer. Please shed some light on this issue and help me with finding out how to solve this problem.

Thank you so much.