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30 September, 05:00

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%.

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Answers (1)
  1. 30 September, 05:11
    0
    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
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