On September 1,2012,Company B signed a $7,392,two-year non-interest-bearing note payable in full on August 31,2014.Company B received $6,000 cash.What was the yield or effective rate of interest?
A) 11 percent
B) 14 percent
C) 18 percent
D) 23 percent

Question

Quizplus · Accepted Answer

The yield or effective rate of interest is 11 percent. This is calculated by using the formula:Yield = (Face value - Present value) / Present value x (360 / Days)In this case, the face value is $7,392, the present value is $6,000, and the days are 730 (from September 1, 2012 to August 31, 2014).Plugging these values into the formula, we get:Yield = (7,392 - 6,000) / 6,000 x (360 / 730)= 1,392 / 6,000 x 0.4932= 0.1101, or 11.01%

On September 1,2012,Company B Signed a $7,392,two-Year Non-Interest-Bearing Note Payable