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

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