Determine the effective interest rate if money is worth 18% compounded monthly.Give your answer to two decimal places.

Answer 1

r=effective interest rate
i=stated interest rate(18%)
n=number of compounding periods

therefore:r={(1+i/n)^n - 1}

i=0.18
n=12
r={(1+0.18/12)^12 - 1}
r=0.20