Pelican Corporation receives a ten-month $200,000 discount interest loan with a 14 percent quoted (simple) interest rate. What is the annual percentage interest rate for the loan? (Round your answer to two decimal places.)

Question

Quizplus · Accepted Answer

The annual percentage interest rate (APR) is calculated by dividing the interest by the loan amount minus the interest, then annualizing it. The interest for 10 months is $200,000 * 14% * (10/12) = $23,333.33. The loan proceeds are $200,000 - $23,333.33 = $176,666.67. The APR is ($23,333.33 / $176,666.67) * (12/10) = 15.85%.

Pelican Corporation Receives a Ten-Month $200,000 Discount Interest Loan with a 14