A financial analyst draws a cash flow diagram to model the following scenario.

A 90-day commercial bill will mature for $100000. The price paid for the bill at issue was $98196.15. The bill was sold 72 days after issue for $99724.82. Calculate the annual rate of simple interest (as a percentage, to two decimal places) earned by the buyer who paid $98196.15 and sold for $99724.82. What was the annual rate of simple discount (as a percentage, to two decimal places) that the buyer sold at (earning a price of $99724.82)?

Here is the cash flow diagram the analyst drew.

Which response best reflects the values of Z, Y, X, W, V, U, T and S?

Question 11Answer

a.

Z is 90.00, Y is $100000.00, X is $98196.15, W is 18.00, V is $99724.82, U is not required, T is 1.40% p.a. (simple discount) and S is 31.57% p.a. (simple interest).

b.

Z is 90.00, Y is $100000.00, X is $98196.15, W is 72, V is $99724.82, U is not required, T is 5.48% p.a. (simple discount) and S is 7.99% p.a. (simple interest).

c.

Z is 90.00, Y is $100000.00, X is $98196.15, W is 72, V is $99724.82, U is not required, T is 5.58% p.a. (simple discount) and S is 7.89% p.a. (simple interest).

d.

Z is 90.00, Y is $100000.00, X is $98196.15, W is 72, V is $99724.82, U is not required, T is 4.37% p.a. (simple discount) and S is 8.48% p.a. (simple interest).