if a 5000 investment grews to 6450 in 30 months of monthly compounding what effective rate of return was the investment earning

First we calculate Nominal Interest Rate using Rate Function in Excel:

=rate(nper,pmt,-pv,fv)*12

Here,

Rate = Nominal Interest Rate = ?

Nper = 30 months

PMT = 0

PV = $5,000

FV = $6,450

Substituting the values in formula:

=rate(30,0,-5000,6450)*12

Rate or Nominal Interest Rate = 10.23%

Now we calculate Effective Rate of Return:

Effective Rate of Return = (1+i/n)^n - 1

Here,

i = Nominal Interst Rate = 10.23%

n = Number of Compounding Periods = 12

Effective Rate of Return = (1+10.23%/12)^12 - 1 = 10.72%