Question

Asked Jan 17, 2019

110 views

Step 1

Given a formula used to calculate the interest rate per peiod of a loan when the compounding period does not match the payment period.

Where r = rate per payment period, i = annual rate, n the number of compounding periods per year, p = number of payments per year.

Step 2

The order of operations in general follow parenthesis, exponents, multiplication, division, addition and subtraction from left to right.

1. We compute what is inside the parenthesis. With in the parenthesis we compute i divided by n and then we do the addition of 1.

2. We compute the exponent next. To do that compute n/p first and use it to find the exponent (n/p) of value what we got inside of parenthesis.

3. Now we subtract 1 from the value which we got in second step. This would give us the final solution to find value of r.

Step 3

Given i = 7.5%, n = 2 and p = 12.

Now let us plug in the numbers in the formula mentioned and use the list of operations in order to solve for r, rate per payment period.

first solve inside the parenthesis and we get 1.0375.

Then solve for the exponent, fir...

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