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On September 1, 2021, Hiker Shoes issued a $106,000, 6-month, noninterest-bearing note. The loan was made by Second Commercial Bank where the stated discount rate is 11%. Hiker's effective interest rate on this loan (rounded) is:

Respuesta :

Answer:

Explanation:

Effective interest rate = [(Interest value of loan / Amount of loan after payment of interest) * (Number of months annually / Number of months notes hold)] * 100

= [($5,830 / $100,170) * (12 / 6)] * 100

= 0.1164 * 100

= 11.64%

1.

Computation the interest value of loan is:

Interest value of loan = Amount of loan * 8 / 12 * Percentage of discount

= ($106,000 * 6/ 12 )* 0.11

= $5,830

2.

Amount of loan after payment of interest = Amount of loan - Interest value of loan

= $106,000 - $5,830

= $100,170