If $100,000 will purchase a 20-year annuity paying $830 at the end of each month, what monthly compounded nominal rate and effective rate of interest will the invested funds in the annuity earn?

Compounded Nominal Rate

The rate of interest quoted for a period, usually a year, without taking into account the effect of compounding within that period.

Effective Rate

The actual interest rate of an investment or loan, taking into account the effect of compounding interest as opposed to the nominal or stated rate.

Annuity

A monetary product designed to deliver regular payouts, mainly aimed at funding retirees' income needs.