math!

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Swan Furnace Cleaners wants to add 0.50% to the effective rate of interest on its credit card. If it currently charges a nominal rate of 4.25% compounded semi-annually, at what value should it set the new nominal rate?

The answer for this question is 4.74%,

the formula for this question is

f=(1+i)^m
=total - 1

I know that j=4.25%
m=2
i=j/m=.0425/2=.02125=2.125%
f=(1+.02125)^2 -1
=0.042951562
=4.30%

but the right answer is 4.74%, i cant seem to figure out how to get that answer.

  • math! -

    you had an effective annual rate of
    .042951563 which I agree with.

    didn't it say they wanted to increase that effective rate by .5% or by .005

    so .04295 + .005 = .04795 = 4.795%

    (So I guess I disagree with their answer)

  • math! -

    it said after i find the efffective rate i should chage that rate and convert bacck by rearranging the formula.

    :S
    very confusing

  • math! -

    im sry...but ure wrong...:-(...but still thnx though:)

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