What is the effective interest rate (rounded) on a 3-month, noninterest-bearing note with a stated rate of 12% and a maturity value of $200,000?
A)12.4%.
B)12.0 %.
C)11.5%.
D)3.0%.

Question

Quizplus · Accepted Answer

The effective interest rate is calculated by considering the actual interest earned over the period. For a 3-month note with a stated annual rate of 12%, the effective rate is slightly higher due to compounding. The effective interest rate can be calculated using the formula for the effective annual rate (EAR) for a noninterest-bearing note, which accounts for the discounting effect.

What Is the Effective Interest Rate (Rounded) on a 3-Month