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you can buy an item for $130 on an in-store payment plan with the promise to pay $130 in 90 days. suppose you can buy an identical item for $124 cash. if you buy the item for $130, you are in effect paying $6 for the use of $124 for three months. what is the effective annual rate of interest? ignore interest rate compounding.

Respuesta :

what is the effective annual rate of interest? ignore interest rate compounding:

I = PRN

I = 3, P =127, N = 3/12

3 = 127 X R X 3/12

12 X 3  = 127 X R X 3

12 = 127 X R

R = 12/127 = 0.094488 = 9.45%

ANSWER: 9.45%

In finance and economics, interest is payment from a borrower or deposit-taking monetary organization to a lender or depositor of an amount above reimbursement of the predominant sum (this is, the amount borrowed), at a selected fee.[1] it's miles wonderful from a rate which the borrower may also pay the lender or a few 1/3 celebration. It is also awesome from dividend that is paid through a organization to its shareholders (owners) from its profit or reserve, however now not at a particular price decided in advance, alternatively on a pro rata foundation as a share in the reward gained by risk taking entrepreneurs when the sales earned exceeds the full costs.

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