On September 1, 2013, Hiker Shoes issued a $108,000, 6-month, noninterest-bearin
ID: 2645699 • Letter: O
Question
On September 1, 2013, Hiker Shoes issued a $108,000, 6-month, noninterest-bearing note. The loan was made by Second Commercial Bank where the stated discount rate is 8%. Hiker's effective interest rate on this loan (rounded) is (Do not round intermediate calculations. Round your final answer to two decimal places, e.g., .1234 as 12.34%.):
On September 1, 2013, Hiker Shoes issued a $108,000, 6-month, noninterest-bearing note. The loan was made by Second Commercial Bank where the stated discount rate is 8%. Hiker's effective interest rate on this loan (rounded) is (Do not round intermediate calculations. Round your final answer to two decimal places, e.g., .1234 as 12.34%.):
Explanation / Answer
Hiker's effective interest rate would be 8.00%. It is because there is no taxation element here which could have reduced the interest rate.
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