Question

If the quoted interest rate on a mortgage loan is 7.5% per year CSA (compounded semi-annually) and the mortgage is to be repaid by way of equal monthly instalments, what is the appropriate period rate for one month? Select one:

a. About .5229% b. About .8000% c. About .6155% d. About 1.000% e. None of the above

Answer 1

Let "r" be the quoted interest rate compounded semi-annually and "i" be the appropriate period rate for one month.

Then,

r = 7.5% or 0.075 per year CSA

Substituting the value or r in the formula, we get:

OR

Therefore, the correct answer is c. About 0.6155%

If you need derivation of the formula used, then let me know in the comments.