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Blastdale Corp is considering borrowing \$15,000 for a 60 day period

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Blastdale Corp. is considering borrowing \$15,000 for a 60-
day period. The firm will repay the \$15,000 principal
amount plus \$200 in interest. What is the effective annual
rate of interest? Use a 360-day year.
Solution
Interest rate for 60-day = \$200/\$15,000 = 1.33%
Stated rate for 360-days = 1.33% * 6 = 8%
Number of compoundings per year = 6
Effective Annual rate of interest = (1+r/m)m - 1 =
(1+.08/6)6 -1 = 8.2715%

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Blastdale Corp. is considering borrowing \$15,000 for a 60 day period. The firm will repay the \$15,000 principal amount plus \$200 in interest. What is the effective annual rate of interest? Use a 360-day year. Solution Interest rate for 60-day = \$200/\$15,000 = 1.33% Stated rate for 360-days = 1.33% ...
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