Personal Finance 1st Edition by Jack R. Kapoor

Exercise 33

Calculating Simple Interest on a Loan. You can buy an item for $100 on a charge with the promise to pay $100 in 90 days. Suppose you can buy an identical item for $95 cash. If you buy the item for $100, you are in effect paying $5 for the use of $95 for three months. What is the effective annual rate of interest? (Obj. 2)