So the number of interest periods you have for

all 3 years would be the 3 years times the 12 months.

So in this case, it'll say that you have

around 36 interest periods in this 3 years.

And this is, we will use it from

calculating using the nominal interest or

the nominal interest rate.

The interest rate I paired one month would

be the 12% divided by the 12 months per year.

So every month, we have an interest of 1%.

So if we want to find the future value, and the balance in the account,

after three years, which here, we can have it after 36 months,

we can use the future value that I just explained in a previous module.

The future value equal to the present value that you got the money,

which is here $2,000 times the 1 plus the i

to the power of the number of interest periods.

So here, I took the 1%, because you have 1%

per month interest, and you have 36 months.

So the $2,000 after 36 months

would be $2,861.54.

So from an effective point of a view, that effective interest rate point of view,

we can come up with the same conclusion and the same results If we

apply the previous equation that I highlighted, which is the effective rate.

The APY, it's equal to 1 plus the APR,

which is the 12% here divided by 12,

which is 12 months, which is c,

what I just highlighted in the previous slide,

to the power of C, which is a 12 minus 1,

which will give you 12.6825%.

So the effective rate, then we use the same equation, but

in this case, the effective rate, we use it per year, not per month.