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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.

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