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

DigiCom wants to drop the effective rate of interest on its credit card by 2%. If it currently charges a nominal rate of 8% compounded daily, at what value should it set the new nominal rate? Note: Please make sure your final answer(s) are in percentage form and are accurate to 2 decimal places. For example 34.56%

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!

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