Question

A $17,000 T-bill is purchased at a 2.75% discount rate for 20 weeks.

Find the effective rate of interest to the nearest hundredth of a percent.


2.76%

2.77%

2.78%

2.75%

Answer 1

The effective rate of interest to the nearest hundredth of a percent is 2.75%

Given:
T-bill value $17,000
purchased at a discount rate of 2.75%
term of 20 weeks.

An effective rate of interest is also referred as the DISCOUNT RATE, market interest rate, the internal rate of return, the annual percentage rate, and yield to maturity.

Since the discount rate is given, it is also the effective rate of interest.