Hi John,

Technically, there isn't a compounding monthly interest rate for the
situation you have described, since there's only a single payment, after 8
months (rather than 8 monthly payments).

Also, you can only solve for the interest rate through iteration, there
being no formula for it (unless the periodic payment is zero). In this case,
the periodic payment (at the 8-month interval) is $200.

You can calculate an effective annual interest rate (through iteration),
using Excel's NPER formula and solving for NPER = 1.5, using the Goal Seek
function.

Cheers


"John" wrote in message
...
I'm trying to work out the effective annual interest rate for:

an item can be purchased for a payment of $100 today and a further $1,300
in
8 months time. The other option is to pay in full today for a cash price
of
$1,200.

How can I calculate the effective annual interest rate (assuming monthly
compounding) being implicitly charged?