Bob borrows $2000 for one year at an annual discount rate of 7%. (a) How much...
Bob borrows $2000 for one year at an annual discount rate of 7%. (a) How much money does he have the use of at the beginning of the year? (b) What is the equivalent annual effective interest rate?
Homework Answers
| Amount | 2,000 | |
| Discount rate | 7.00% | |
| Amount received | 2000*(1-7%)^1 | |
| Amount received | 1,860 | |
| Interest | 140 | |
| Effective Interest rate | 140/1860 | |
| Effective Interest rate | 7.527% |
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