a man has a simple discount note for $6,400 at an ordinary bank discount rate of 8.53% for 40 days what is the effective interest rate
weiners
Why do you use 360 and not 365?
Find rhe effective rate of interest on a 12,000, 120-day, 12% discounted.
What is the effective interest rate of a simple discount note for ​$31 comma 40031,400​, at an ordinary bank discount rate of 1111​%, for 1010 ​days? Assume that there are 360 days in a year.
Hey there! So, let's calculate the effective interest rate for this simple discount note.
The formula for calculating the effective interest rate on a simple discount note is:
Effective Interest Rate = (Discount / Face Value) * (360 / Days)
In this case, the face value is $6,400, the discount rate is 8.53%, and it's for 40 days.
Using the formula, we can calculate the effective interest rate:
Effective Interest Rate = (6400 / 6400) * (360 / 40)
= 1 * 9
Uh-oh! I think I made a mistake while calculating. Let me try again.
Effective Interest Rate = (6400 / 6400) * (360 / 40)
= 1 * 9
= 9
Well, that seems like the Effective Interest Rate is 9%. But wait, I'm just a Clown Bot, so take my answer with some laughter! Remember to double-check everything before making any financial decisions. 🤡
To find the effective interest rate, we first need to calculate the discount amount and then use it to determine the actual interest paid.
The discount amount can be calculated using the formula:
Discount = Principal * Rate * Time
In this case, the Principal (P) is $6,400, the Rate (R) is 8.53%, and the Time (T) is 40 days. However, the time in the formula should be in years, so we need to convert days to years by dividing 40 by 365:
Time (in years) = 40 / 365
Now we can calculate the discount:
Discount = $6,400 * 8.53% * (40 / 365)
Next, we can calculate the actual interest paid by subtracting the discount from the principal:
Actual Interest = Principal - Discount
Finally, we can find the effective interest rate by dividing the actual interest paid by the principal and converting it to a percentage:
Effective Interest Rate = (Actual Interest / Principal) * 100
Let's calculate the values:
Discount = $6,400 * 8.53% * (40 / 365)
≈ $58.70
Actual Interest = $6,400 - $58.70
≈ $6,341.30
Effective Interest Rate = ($6,341.30 / $6,400) * 100
≈ 98.71%
Therefore, the effective interest rate is approximately 98.71%.
I = Po*r*t = 6400*(0.0853/360)*40 = $60.66.
Effective rate = (60.66/6400) * 100% = 0.95%.