Find the equivalent rate of interest for a discount rate of 7.5% for 60 days.

Question

would i use the formula r= d/1-dn? which would be .075/1-.075(60/360) = .0625 or 6.25%

Answer 1

Hello, thank you for taking the time to post your question!

The underlying formula that you want to use here is

R = d / (1 – d*T)

From the information in the question we know that d = 0.075 and T = 60/360, so putting it all together would give us the equation

R = 0.075 / (1 – 0.075*60/360)

R = 0.0759

So the equivalent rate of interest in this case is 7.59%

I hope that helps get you moving in the right direction! Feel free to reach out if you have any additional questions beyond that :)

Answer 2

if the 7.5% is the annual interest rate, then the formula would be the following to find the equivalent rate of interest rate for 60 days:

 

((0.075 + 1)^(1/(60/360)) - 1) * (60/360) = approx. 7.28%

 

This is because the 7.28% interest rate is for 60 days, and is compounded six times a year (assuming a 360-day year) to yield 7.5% annually.

Answer 3

Barbara,

 

if the 7.5% is the annual interest rate, then the formula would be the following to find the equivalent rate of interest rate for 60 days:

 

((0.075 + 1)^(1/(60/360)) - 1) * (60/360) = approx. 7.28%

 

This is because the 7.28% interest rate is for 60 days, and is compounded six times a year (assuming a 360-day year) to yield 7.5% annually.

 

-John