Question

Bernie borrowed 8,000.00 for 180 days from lion bank. The bank discounted the note at 5% A) what proceeds does Bernie Receive? B) Calculate the effective rate to the nearest hundredth percent.

Answer 1

A) "Discounting the note" means that they paid him 5% less ($7600).
B) If they expect full payment in 180 days, with no additional interest, then the effective annualized interest rate is
$400/$7600 x 360/180 = 10.53%

Answer 2

I thought that it was 8000 x .05 x .5000 and that would have been 200