Answer to Question #189560 in Financial Math for ntombi mshango

Question

An effective rate of 29,61% corresponds to a nominal rate, compounded weekly, of

[1] 34,35%.

[2] 29,53%.

[3] 26%.

[4] 29,61%.

[5] none of the above

Answer 1

Let effective interest rate=$i$ ,

nominal interest rate is $j$ ,

$i=100((\frac{1+j}{m})^m-1)$

$29.61=100((1+\frac {r} {52} )^{52}-1 )$

Put r=26,

$29.61=100((1+\frac {26} {52} )^{52}-1 )$ ,

29.61=29.61.

LHS=RHS.