You have invested $20,000 in a bond. The bond matures in five years and has a maturity value of $30,000. Interest is compounded monthly. You want to determine the periodic interest rate for this investment.
Before entering the information into the memory registers, choose 5 radix places from the Acc (accuracy) key pop-up menu to produce more accurate results.
Memory register usage:
Register 0: 30000 (future value) Register 1: 20000 (present value) Register 2: 60 (term - 5 x 12)
Clicking SELECT on Rate returns.00678, which tells you that the periodic (monthly) interest rate is 0.678%, under 1% per month. To determine the annual rate, multiply the above formula by 12, which yields a result of 8.14%.