# Thread: Equivalent rates of interest-Techniques and elements of finance

2. ## 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!

3. ## Re: Equivalent rates of interest-Techniques and elements of finance

Originally Posted by schwanson1
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, $i^{(12)}=((1.077444)^{1/12}-1)*12 = 0.0748 = 7.48\%$