Chapter 10.III, Problem 21RE

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8th Edition

Robert Brechner + 1 other

ISBN: 9781305585447

Textbook Problem

Calculate the interest, purchase price, and effective interest rate of the following Treasury bill (T-bill) purchases. Round effective interest rate to the nearest hundredth of a percent.

Face |
Discount |
Term |
Purchase |
Effective |
||||||||

Value |
Rate (%) |
(weeks) |
Interest |
Price |
Rate (%) |
|||||||

21. | $ 15.000 | 5,20 | 13 | $195 | $14,805 | 5.27 |

To determine

**To calculate:** The amount of bank interest, purchase price and effective rate of interest where face value is

Explanation

**Given Information:**

Face value is

**Formula used:**

The formula to calculate the time is,

The formula to compute the amount of bank interest is,

The formula to calculate purchase price is,

The formula to calculate effective rate of interest is,

**Calculation:**

Consider that face value of loan is

Compute the interest amount,

Simplify the interest rate as,

Evaluate the time as,

Substitute

“

Hence, amount of interest is

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