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April 23, 2014

April 23, 2014

Posted by **Amy** on Saturday, March 27, 2010 at 8:51pm.

The correct answer was: 6.14%

You should first calculate the effective rate with the formula:

f = (1 + i)m - 1

where f is the effective rate, i is the periodic rate, and m is the number of compoundings per year.

You shoud obtain 0.08%. Then you should change that rate and convert back by rearranging the formula.

i need help understanding how to get that same answer!

- math help plz! -
**Amy**, Saturday, March 27, 2010 at 9:31pmnvm...i got this...

- math help plz! -
**Damon**, Saturday, March 27, 2010 at 9:59pmm is 365 days in a year

I think you mean:

f = (1 + i)^m - 1 So to the power m

where i = nominal rate/365

i = .08/365

so

f = (1 +.08/365)^365 = 1.0833

so 8.33% is present effective rate

Now

we want to go down 2%

so

6.33 % is new effective rate

so

1.0633 = (1 + r/365)^365

log 1.0633 = 365 log (1 + r/365)

.00007302963 = log (1+ r/365)

1+r/365 = 1.000168171

r =.0614

or

6.14%

- math help plz! -
**Amy**, Saturday, March 27, 2010 at 10:04pmTHNX again!!! :D

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