monthly compounding investment, effective, interest, monthly, someone

irlfaan7

if an investment of $4000 will grow to $6250 in four years with monthly compounding, the effective annual interest rate will be closest to:

a. 11.2%
b. 12.3%
c. 13.0%


FV=6250 PV=-4000 N=48 i=cpt

then i multply this by 12 to get 12.3 but they say the answer is 13....

can someone explain this? thanks

agulani

i believe for the effective rate you have to plug in your answer to this equation. (1+answer from TVM)^12 - 1.

soddy1979

solved this one like 10 mins back! make sure you hit % after you get the answer from TVM.