Find discount rate capitalized semi-annualy that is equivalent to interest rate of 24% capitalized quarterly.

Expert Solution

annual effective interest rate EAR=(1+i/m)^m-1=(1+24%/4)^4-1=26.2477%

annual effective discount rate d=EAR/(1+EAR)=26.2477%/(1+26.2477%)=20.7906%

discount rate capitalized semiannually=(1-(1-d)^(1/2))*2=(1-(1-20.7906%)^(1/2))*2=22.001%

jeff jeffy answered 2 years ago

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