The effective rate of a $25,000 non-interest-bearing simple discount 10%, 90-day note is

A. 10.62%.

B. 10.8%.

C. 10.26%.

D. 10%.

Question

Business

Giancarlo

21 May, 17:16

The effective rate of a $25,000 non-interest-bearing simple discount 10%, 90-day note is

A. 10.62%.

B. 10.8%.

C. 10.26%.

D. 10%.

+4

Answers (1)

Know the Answer?

Barbara Clayton · Answer 1

For the answer to the question above, the $25,000 due in 90 days.

I'll use 365 days per year. 10% simple discount:

25000*0.10 (90/365) = 616.44

Cash in hand at the beginning of the 90 days:

25000 - 616.44 = 24,383.56

Solve for r: 616.44 = 24383.56*r * (90/365)

r = 0.10252837 or the nearest answer is letter C. 10.26%

It is not exact because maybe he rounded off the 24383.56

The effective rate of a $25,000 non-interest-bearing simple discount 10%, 90-day note isA. 10.62%.B. 10.8%.C. 10.26%.D. 10%.

The effective rate of a $25,000 non-interest-bearing simple discount 10%, 90-day note is

A. 10.62%.

B. 10.8%.

C. 10.26%.

D. 10%.