First, we need to calculate the interest that Homer is entitled to receive after 230 days. We can do this by multiplying the principal ($1,500) by the interest rate (0.05) and the time in years (230/360):
$1,500 * 0.05 * (230 / 360) = $47.92.
Therefore, after 230 days, Homer would be entitled to receive $1,500 + $47.92 = $1,547.92.
Now we can calculate the interest that Moe earned by purchasing the promissory note at a discounted price and holding it for 360 days. Moe paid $1,460 for the note and received $1,547.92 after 360 days. Therefore, Moe earned $1,547.92 - $1,460 = $87.92 in interest.
To find the interest rate earned by Moe, we divide the interest earned ($87.92) by the amount paid for the note ($1,460) and multiply by 100%:
($87.92 / $1,460) * 100% = 6.03%.
Therefore, the simple interest rate earned by Moe is 6.03%, rounded to .01.
Homer won a prize in the lottery of $3000, payable $1,500 immediately and $1,500 plus 5% simple interest payable in 230 days. Getting impatient, Homer sells the promissory note to Moe for $1,460 cash after 360 days. Using a nominal 360 day year, find the simple interest rate, rounded to .01, earned by Moe.
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