The effective rate of a $30,000 non-interest-bearing simple discount 5%, 60-day note is:
A)5.0%
B)5.04%
C)6.0%
D)5.14%
E)None of these

Name: The effective rate of a $30,000 non-interest-bearing simple discount 5%, 60-day note is: A)5.0% B)5.04% C)6.0% D)5.14% E)None of these
Brand: Quizplus
Rating: 4.8 (41 reviews)

Question

Quizplus · Accepted Answer

The effective rate is calculated as (100 - discount rate) / (100 - discount rate * days to maturity / 360) - 1.Plugging in the values, we get (100 - 5) / (100 - 5 * 60 / 360) - 1 = 5.04%.

The Effective Rate of a $30,000 Non-Interest-Bearing Simple Discount 5