Q3 An internet company offers 4100 payable now for 6 years s

Q3) An internet company offers $4100 payable now for 6 years subscription. If the annual effective interest rate is 12.68% compounded monthly.

a) What is the monthly effective interest rate?

b) What is the nominal interest rate?

c) What is the subscription cost per month

d) Repeat sections (a) and (b) if the interest rate is continuously compounded

a) Effective monthly intrest rate = annual effective intrest rate / 12

Effective monthly intrest rate = 12.68/12 = 1.057%

b) nominal intrest rate = i

n = 12 months

effective intrest rate = ( 1 + i /n)ⁿ - 1

0.1268 = (1 + i / 12 )¹² - 1

(1 + i/12)¹² = 1.1268

1 + i/12 = 1.00999

0.009999 = i/12

i = 11.99% = 12% (app)