Hi, Uuum, can anyone tell me how to solve for ‘r’ using the BAII Plus Prof? Thank you!
post the question and I’ll give it a whirl
Thanks! Here it is: A client is confused about two terms on some certificate of deposit rates quoted at his bank in the US. You explain that the stated annual rate is a rate that does not take into account compounding within a year. The rate his bank calls APY (annual percentage yield) is the effective annual rate taking into account compounding. The bank’s customer service rep mentioned monthly compounding, with $1000 becoming $1061.68 at the end of a year. To prepare to explain the terms to your client, calculate the stated annual interest rate that the bank must be quoting. I can’t figure out how to solve for this using my calculator. Thanks!
hmmm, i’m rusty. is it 6.35%?
The answer should work out to 6%. The textbook shows how to solve for it but not with my calculator …
Okay, yeah that makes sense. so you need to get the rate with the monthly compounding which is what they give you, so (1061.68/1000) -1 = 6.168% so thats the rate using monthly componding, they want the annual rate so: (1.06168)^ 1/12 = .005 percent. Thats the monthly rate * 12 months = 6.0
Got it! Cheers jut111!!!
How did you guys know that it was monthly compounding? I didnt see it anywhere in the question…
Gooner: “bank’s customer service rep mentioned monthly compounding” To solve this using a calculator I entered… 12 N -1000 PV 1061.68 FV CPT I/Y -> 0.50002 thats the monthly rate… now multiply that by 12 to get the stated annual rate.