question archive If you sign a discount note for $4,200 at a bank discount rate of 9%, for 90 days, what is the effective interest rate? (Round to the nearest tenth percent
If you sign a discount note for $4,200 at a bank discount rate of 9%, for 90 days, what is the effective interest rate? (Round to the nearest tenth percent
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If you sign a discount note for $4,200 at a bank discount rate of 9%, for 90 days, what is the effective interest rate? (Round to the nearest tenth percent
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Answer:
I = PRT; I = $4,200(0.09)(90/360)
I = $94.5 (Bank discount)
Proceeds = $4,200 - $94.5 = $4,105.5
R = I/PT;
R = $94.5 /($4,105.5)(90/360)
R = 0.0920716
R or the effective interest rate = 9.21%
