Assume that Montana Mining,Inc.borrows $5,000,000 for 120 days.The total interest paid is $150,000.What is the APY,or Effective Annual Rate of interest that Billings pays?
A) 3.00%
B) 9.00%
C) 9.27%
D) 9.77%

Question

Quizplus · Accepted Answer

To find the APY, we first need to find the nominal annual rate (NAR) using the formula:

NAR = (total interest / principal) x (360 / days)

NAR = (150,000 / 5,000,000) x (360 / 120) = 0.09 or 9%

Next, we can use the formula for APY:

APY = (1 + NAR / m)^m - 1

where m is the number of compounding periods in a year. Since the question does not provide information on how often the interest is compounded, we can assume it is compounded daily (m = 365):

APY = (1 + 0.09 / 365)^365 - 1 = 0.0927 or 9.27%

Therefore, the answer is C) 9.27%.

Assume That Montana Mining,Inc