Answer to Question #193098 in Financial Math for Glen Bezuidenhout

Question

If a simple interest rate of 24% per year, is equivalent to a simple discount rate of 20,5% per year, then the time under consideration is approximately

1.     854 days.

2.     711 days.

3.     312 days.

4.     260 days.

5.     304 days.

Answer 1

One full period the discount rate and interest rate would be equal.

$0.24x=0.205 \\ x = \frac{0.205}{0.24} = 0.8541 \\ x=0.8541$

Then there are 365 days in the year.

$n = 365 \times 0.8541 = 311.8$

n = 311.8 = 312 days

Answer: 3. 312 days