Financial techniques help

Suge Knight:

If the rate of interest is 7.3% p.a. effective, find the equivalent nominal rate of interest p.a. if it were payable 2 times a year. (as a %, to 2 decimal places)

(j2 is required and not the half-yearly rate.
Check that your calculated value of j2 is slightly smaller than the j1 value of 7.3%.)

Hi Suge Knight,

Let me see what i can do for you.

(1+0.073) ¹ = (1+(r/2)) ²

1.073 = (1+(r/2)) ²

sqrt(1.073) = 1+(r/2)

r/2 = sqrt(1.073) -1 = 0.035857 This is the efective 6 monthly rate.

r = 2[sqrt(1.073) -1] = 0.071714266 This is the nominal yearly rate.

The nominal yearly rate to 2 dec places is 7.17%