Finance major that can't remember algebra

[tkthustler]

I'm attempting to use the interest rate parity equation and I'm close but just can't remember how to do the problem algebraicly. Here is what I have.

f1/e0 = 1+rh/1+rf I have to anualize it so I have to divide by 6 because my rf and rh is given in 60 days. which is where my problem comes in.

f1/e0 = .973 so... .973= (1 +.0868/6)/ (1+rf/6)

.973=1.014/ (1+rf/6)

I'm attemtping to find "rf" so I'm not sure what my next step is. The solution is rf=.2513. Any help is appreciated.

 

[Denis]

.973=1.014/ (1+rf/6)

.973(1 + rf/6) = 1.014
.973 + .973rf/6 = 1.014 ; multiply by 6 to get rid of fraction:
5.838 + .973rf = 6.084

All yours to wrap up!

 

[tkthustler]

I c... Thanks so much.