A$17,000 t-bill is purchased at a 2.75% discount rate for 20 weeks. find the effective rate of interest to the nearest hundredth of a percent.

Note: 20 weeks = 20/52 or 5/13 of a year.

Let E = effective rate of interest

E = [1 + (r/m)]^m - 1 where r is the nominal (annual ) advertised rate; m is the number of compounding periods/year.

Let r = 0.0275

Let m = 5/13

Plug into formula and do the math.

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