The SKC Corporation plans to borrow $1,000 for a 90-day penod. At maturity the firm will repay the $1.000 principal amount plus $45 interest What is the effective annual rate of interest (APR) for the loan? (Select the best choice below) OA 18.00% OB 450% OC. 1925% OD. 458 %

The SKC Corporation plans to borrow $1,000 for a 90-day penod. At maturity the firm will repay the $1.000 principal amount plus $45 interest What is the effective annual rate of interest (APR) for the loan? (Select the best choice below) OA 18.00% OB 450% OC. 1925% OD. 458 %

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 14P

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Concept explainers

Effective Interest Rate

The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.

Question

The SKC Corporation plans to borrow $1,000 for a 90-day penod. At matunity the firm will repay the $1.000 principal amount plus $45 interest What is the effective annual rate of interest (A/F) for the loan? (Select the best
choice below)
OA 18.00%
OB. 450%
OC. 1925 %
OD. 4.58%

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