[MOVED] finding rate of return: compounded nominal rate

missl

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Nov 12, 2007
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Hi guys, I am having trouble understanding the question. Can someone please explain how to find the compounded nominal rate?

After 10 ½ years of contributions of $2,000 at the end of every six months to an RRSP, the accumulated amount stood at $65,727.82. What semi-annually compounded nominal rate and equivalent compounded monthly rate of return were earned by the funds in the RRSP?
 

Denis

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Feb 17, 2004
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Well MissL, someone else may help you with this, but not me;
your wording is hard to follow: can you ask someone in class
to check your spelling, and show you how to post clearly; thank you.
 

Denis

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Hey good job, MissL; very clear now :wink:

OK; what we have using financial formula:

2000[(1 + i)^21 - 1] / i = 65727.82 : 21 is number of semi-annual periods in 10 1/2 years

And we want to solve for i, the interest rate used at every semiannual period.

Unfortunately, "i" cannot be isolated in such equations, so you need to go by
"trial and error": try rates until you hit one that works!
This is a process known as iteration.

Is this all news to you?

Anyway, rate comes out to be 4.25%; I have a cheap financial calculator
that "does the work" on these.

So 2000[(1.0425)^21 - 1] / .0425 = 65727.82
 

missl

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Nov 12, 2007
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Yes this stuff is new to me. But I just want to say thanks for your help.
 

missl

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Nov 12, 2007
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well actually I am using SHARP EL 738 financial calculator ...
 

Denis

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Feb 17, 2004
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missl said:
well actually I am using SHARP EL 738 financial calculator ...
So you can get the 4.25 %, right?
Still got the instruction manual?
 

missl

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Nov 12, 2007
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? :?
 

missl

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Nov 12, 2007
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opps I mean yes :lol:
 
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