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# Calculations with Interest Rates

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a. What amount of money should you pay each month to retire a \$12000 debt in five years if the interest rate on money is 10% nominal annual interest rate compounded monthly?

b. What amount of money today is equivalent to \$100 per month compounded quarterly for ten years at 5%?

c. If you buy a piece of land for \$10,000 and spend \$1000 per year on taxes, what is your rate of return if you sell the land for \$20,000 in 6 years?

d. If the equivalent annual interest rate is 15%, what is the monthly rate that would be compounded to achieve this?

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#### Solution Preview

Please see the attached file for full problem description.

a. What amount of money should you pay each month to retire a \$12000 debt in five years if the interest rate on money is 10% nominal annual interest rate compounded monthly?

Monthly interest rate [10%/12], RATE: 0.0083333333
Number of months [5 years * 12], NPER: 60
Present value, PV if any: 0
Future value, FV: \$12,000
Amount to be paid each month, PMT = \$154.96 [Using =PMT(rate,nper,pv,fv) function]

b. What amount of money today is equivalent to \$100 per month compounded quarterly for ten years at ...

#### Solution Summary

This solution explains calculations in Excel for questions regarding interest rates.

\$2.19