1. Karl receives a medical bill that is due to be paid in full within 210 days. If Karl pays within 30 days, he receives a 7% discount. Karl has two choices: i. Pay the bill in 30 days for 93% of the amount due in 210 days. ii. In 30 days, deposit 93% of the amount due in 210 days. The deposit will earn an annual simple discount rate of d for 180 days, at which time Karl will use the proceeds to pay the bill in full. There are 365 days in a year. The amount of time elapsed in years is therefore equal to the number of days elapsed divided by 365 . What is the minimum value of d that will cause Karl to choose the second option? a. 11.23% b. 13.75% c. 14.19% d. 22.86% e. 11.55% Solution