Answer :
Answer:
a) r = 1.65% *12 = 19.8%
b) [tex] r = (1+i)^{12} -1[/tex]
And i= 0.0165 and replacing we got:
[tex] r = (1+0.0165)^{12} - 1 =0.21699[/tex]
And if we convert this into % we got: 21.699%
Explanation:
Nominal interest rate represent the interest rate before taking account the inflation
The effective annual interest rate represent the real return from an investment
Part a
For this case the nominal interest is given by:
r = 1.65% *12 = 19.8%
Part b
We can use this formula:
[tex] r = (1+i)^{12} -1[/tex]
And i= 0.0165 and replacing we got:
[tex] r = (1+0.0165)^{12} - 1 =0.21699[/tex]
And if we convert this into % we got: 21.699%