Finance / Econ

A business invests $8,000 into an account that has 5% interest per-year. Annual inflation is 3.5 % over the next 5 years. Determine the inflation rate per half year?

I tried doing this:
MARR_R = (1+MARR_C)/(1+f) - 1
--> 6% = (1+MARR_C)/(1+3.5%) - 1
--> MARR_C = 9.71 %/yr = 9.71/2 %/6month = 4.86 %/6month.

But I got the answer wrong since none of the multiple choice answers were that value.

The question was multiple choice, and here were the answers:
(a) 9.71 %
(b) 5.67 %
(c) 8.26 %
(d) 4.74 %

Could somebody clarify how to do this properly? Thanks.

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asked by Joey
  1. ***Correction for the "Determine the inflation rate per half year":

    The question asked for the actual/current MARR per half-year, not the inflation rate.

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    posted by Joey
  2. Sorry, another part I forgot to write (mixed it up with a similar question right by this question):

    The real MARR (MARR_R) is given to be 6%.

    What I wrote for the answer choices and my attempt at a solution still apply though.

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    posted by Joey

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