1) Calculate the effective rate of interest (to the nearest hundredth percent) o
ID: 2781796 • Letter: 1
Question
1) Calculate the effective rate of interest (to the nearest hundredth percent) of the following Treasury bill. Given: $10,000 Treasury bill, 3.85% for 13 weeks.
2) Karim was planning for his vacation to the Bahamas. To cover his costs, he took out a $15,800, 4% simple discount note paying $40 in interest. What was the length of his loan? Assume a 365-day year.
3) First Bank loaned $360,000 for 180 days to a company purchasing a rock-crushing machine. The bank sold the 7% simple interest note 120 later at an 8% discount rate. Find the proceeds. Assume a 360-day year for both notes.
Explanation / Answer
1) 52/13*3.85% 15.40% per annum Assume 52 weeks in a year 2) 15800*4% 632 for 365 days Karim paid 40, So 365/632*40 Length of Loan 23 Days 3) Loan 360000 for 180 days 7% for 120 days 3,60,000 =360000*7%*120/365 8,285 8% for 60 days 3,68,285 =368285*8%*60/365 4,843 Proceeds 13,128
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