QUESTION 7 0116 0 b 126 04 161 QUESTION Jay just turned age

QUESTION 7 0116 0% ? b. 12.6% 04 161% QUESTION Jay just turned age 15) has $4740 to start his college fund today He also estimates that his lawn care business will earn $4000 per year for the next three year, All of his hich wil be invested at 8% per year How much money wAM Jay have in his account when he starts college in three years? O a $24470

Solution

7. Effective annual interest rate = [ 1+(i/n)] ⁿ - 1

Here, i = nominal interest rate = stated annual interest rate = 15? = 0.15

n = No. Of compounding periods = 12

Therefore, effective annual interest rate = [ 1+(0.15/12)]¹² - 1 = (1.0125)¹² -1 = 1.161 - 1 = 0.161 = 16.1?

Answer- option D