SOLUTION: Please help with the formula use to solve the following problem:
A company is considering borrowing $5000 for a 90 day period. The firm will repay the $5000 principle amount plus
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Question 180308This question is from textbook Foundations Of Finance
: Please help with the formula use to solve the following problem:
A company is considering borrowing $5000 for a 90 day period. The firm will repay the $5000 principle amount plus $150 in interest. What is the effective annual rate of interest? Use a 360-day year.
This question is from textbook Foundations Of Finance
Answer by stanbon(75887) (Show Source): You can put this solution on YOUR website!
Please help with the formula use to solve the following problem:
A company is considering borrowing $5000 for a 90 day period. The firm will repay the $5000 principle amount plus $150 in interest. What is the effective annual rate of interest? Use a 360-day year.
--------------------
Interest = Prt
150 = 5000*r*(90/360)
150 = 5000r*(1/4)
600 = 5000r
r = 0.12 = 12%
====================
Cheers,
Stan H.
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