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Math Help - Equivalent rates of interest-Techniques and elements of finance

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    Equivalent rates of interest-Techniques and elements of finance

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    Re: Equivalent rates of interest-Techniques and elements of finance

    Sorry I can't type in the writing box for some reason, here's my question

    If the interest rate is 7.6% p.a. convertible 2 times a year, find the equivalent nominal rate of interest p.a. if it were payable 12 times a year. (as a %, to 2 decimal places)

    How do I do this and what is the answer please, cheers!
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    Re: Equivalent rates of interest-Techniques and elements of finance

    Quote Originally Posted by schwanson1 View Post
    Sorry I can't type in the writing box for some reason, here's my question

    If the interest rate is 7.6% p.a. convertible 2 times a year, find the equivalent nominal rate of interest p.a. if it were payable 12 times a year. (as a %, to 2 decimal places)

    How do I do this and what is the answer please, cheers!
    I think this is the way to go about it:

    i^{(2)}=0.076, so find the effective annual rate i = (1+0.076/2)^2 = 1.077444. Now, i^{(12)}=((1.077444)^{1/12}-1)*12 = 0.0748 = 7.48\%
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