The effective rate of a 25,000 Non-interest-bearing simple discount 10% 90-day Note is
A) 10.26%
B)10.62%
c)10.8%
d)10%
To calculate the effective rate of a non-interest-bearing simple discount note, you need to use the formula:
Effective Rate = (Discount / Face Value) × (360 / Days)
In this case, the face value of the note is $25,000, the discount rate is 10%, and the note matures in 90 days.
First, calculate the discount:
Discount = Face Value × Discount Rate
Discount = $25,000 × 0.10
Discount = $2,500
Next, substitute the values into the formula:
Effective Rate = ($2,500 / $25,000) × (360 / 90)
Effective Rate = 0.10 × 4
Effective Rate = 0.40
Finally, convert the effective rate to a percentage:
Effective Rate = 0.40 × 100%
Effective Rate = 40%
Therefore, the effective rate of the 25,000 non-interest-bearing simple discount 10% 90-day note is 40%.
However, none of the given options match the calculated rate. It is possible that there is a mistake either in the options or in the calculation.