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1 vote
Justin discounts a 115-day note for $26,000 at 8.5%. the effective rate of interest to the nearest tenth percent is:

2 Answers

3 votes
8.7%

$26,000 x .085 x 115/360 = $705.97
$26,000 - $705.97 = $25,294.03
$25,294.03 x 115/360 = $8080.04
$705.97/$8080.04 = 8.7%
User Rkrauter
by
7.8k points
5 votes

Answer:

8.74%

Step-by-step explanation:

Interest = Principal x Interest Rate = $26,000 x .085 x 115/360 = $705.97

EAR = Interest/[(Principal - Interest) x (115/360)]

= $705.97/[($26,000 - $705.97) × (115/360)] = $705.97/ $8,080.04 = 0.0874, or 8.74%

User JMiguel
by
8.1k points

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