Answer:
11.6(approx)
Explanation:
Given:
Per month Payment(PMT) = $450
Total receive money(FV) = $27,000
Number of payment(NPER) = 12 x 4 years = 48
Effective rate of return:
Computation or interest rate:
In excel
=RATE(NPER;-PMT; ;FV)
=RATE(48;-450; ;27000)
= 0.92
Annual interest rate = 12 x 0.92
= 11.04%
Effective rate of return = [tex][1+\frac{i}{n} ]^n-1\\[/tex]
[tex][1+\frac{0.1104}{48} ]^{48}-1\\[/tex]
[tex][1.0023]^{48}-1\\1.11658-1\\0.1165[/tex]
Therefore, Effective rate of return is 11.6% (approx)
