2. An initial $1900 investment was worth $2400 after two years and six months. What quarterly compounded nominal rate of return did the investment earn?
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The rate of interest compounded quarterly is 9.2%
Step-by-step explanation:
Given as :
Initial investment principal = p = $1900
Amount after 2 years 6 months = A = $2400
Time period = T = 2 years 6 months = 2.5 years
Let The rate of interest compounded quarterly = r%
According to question
From Compound Interest method
Amount = Principal ×
i.e A = p ×
Or, $2400 = $1900 ×
Or, =
Or, = 1.26
Taking power both side
=
or, = 1.023
Or, = 1.023 - 1
Or, = 0.023
∴ r = 9.2
So, The rate of interest compounded quarterly = r = 9.2%
Hence, The rate of interest compounded quarterly is 9.2% Answer
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