Final answer:
The effective interest rate for Jones Company's loan is 12% per year. This is calculated using the simple interest formula by dividing the interest paid by the product of the principal amount and the fraction of the year the loan is held.
Step-by-step explanation:
The student is asking how to calculate the effective interest rate for a situation in which Jones Company pays $6,000 in interest on a loan of $100,000 with a 180-day term. To calculate the effective interest rate, we can use the formula for simple interest: Interest = Principal × rate × time. Given that the interest (I) is $6,000, the principal (P) is $100,000, and the time (t) is ⅓ of a year (since 180 days is half a year), we can solve for the rate (r).
First, replace the known values: $6,000 = $100,000 × r × ⅓.
Then, solve for the rate (r):
r = $6,000 / ($100,000 × ⅓) = $6,000 / $50,000 = 0.12 or 12%
Therefore, the effective interest rate for the loan is 12% annually. It's worth noting that this rate does not take into account the effect of compounding since the interest is calculated as simple interest.