Answer:
Multiple choices:
A. 9.57%.
B. 9.50%.
C. 9.28%.
D. 9.49%.
Effective interest rate on the loan taken by Hiker Shoes is 9.57% ,option A
Step-by-step explanation:
The starting in arriving at the effective interest is by calculating the actual dollars amount paid as interest:
interest=9%*$100,000*8/12
=$6000
effective interest=interest/actual cash received*12/8
actual received by Hiker shoes=$100,000-$6000
=$94000
effective interest=$6000/$94000*12/8
effective interest=9.57%
Even though the discount rate stated on the note is 9%,but the actual interest cost incurred by Hiker Shoes is in the region of 9.57%