Question

Bolt Corp. acquires equipment valued at $81,630 by signing a 3-year noninterest-bearing note payable for $100,000. Calculate the implicit interest rate on the note.

Answer 1

7%

Step-by-step explanation:

Calculation for the implicit interest rate on the note

First step is to calculate the PV factor

PV factor=$81,630/100,000

PV factor = 0.81630

Last Step is to find the implicit interest rate by using the PV table for 3 years to find the factor that matches the PV factor of 0.81630

Hence the factor that matches the PV factor of 0.81630 can be found or see in the 7% column which means that the implicit interest rate will be 7%

Therefore the implicit interest rate on the note will be 7%