Swan Furnace Cleaners wants to add 0.50% to the effective rate of interest on its credit card. If it currently charges a nominal rate of 4.25% compounded semi-annually, at what value should it set the new nominal rate?

Question

The answer for this question is 4.74%,

the formula for this question is

f=(1+i)^m
=total - 1

I know that j=4.25%
m=2
i=j/m=.0425/2=.02125=2.125%
f=(1+.02125)^2 -1
=0.042951562
=4.30%

but the right answer is 4.74%, i cant seem to figure out how to get that answer.

Answer 1

you had an effective annual rate of
.042951563 which I agree with.

didn't it say they wanted to increase that effective rate by .5% or by .005

so .04295 + .005 = .04795 = 4.795%

(So I guess I disagree with their answer)

Answer 2

it said after i find the efffective rate i should chage that rate and convert bacck by rearranging the formula.

:S
very confusing

Answer 3

im sry...but ure wrong...:-(...but still thnx though:)