1) (Effective interest Rate) A store will give you a 3% discount on the cost of your purchase if you pay cash today. Otherwise, you will be billed the full price with payment due in 1 month. what is the implicit borrowing rate being paid by customers who choose to defer payment for the month?
2) (effective interest rate) You invest 1000$ at a 6% annual interest rate, stated as an APR, interest is compounded monthly. how much will you have in 1 year? in 1.5 year ?
3) (effective interest rate) In a discount interest loan, you pay the interest payment up front. For example, if a 1-year loan is stated as 10,000$ and the interest rate is 10%, the borrower "pays" .10 * $10,000 = $1000 immediately, thereby receiving net funds of $9000 and repaying $10,000 in a year.
a) what is the effective interest rate on this loan ?
b) what is the effective annual rate on a 1-year loan with an interest rate quoted on a discount basis of 20% ?