Computing the nominal interest rate

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Reference no: EM131777874

Question: Sally Smith has been presented with an investment opportunity. She can invest her money in an account that pays a quarterly rate of 1.25%. Any money she invests must stay in the account for 6 years. If she withdraws it early she will pay a penalty of 10% of the amount of the investment.

a. The nominal interest rate

b. The annual effective interest rate

c. If Sally invests $15,000, how much will she have after 6 years?

d. If Sally invests $15,000, but withdraws it after 4 years how much will she withdraw?

Reference no: EM131777874

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