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10 March, 15:03

On September 1, 2018, Hiker Shoes issued a $102,000, 8-month, noninterest-bearing note. The loan was made by Second Commercial Bank where the stated discount rate is 11%. Hiker's effective interest rate on this loan (rounded) is: a. 11.8%b. 11.87%c. 11.00%d. 11.79%

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  1. 10 March, 16:06
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    b. 11.87%

    Explanation:

    interest = $102,000*11%*8/12

    = $7480

    Effective interest rate = ($7480 / ($102000 - $7480)) * 12/8

    = ($7480/94520) * 12/8

    = 11.87%
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