I Just Gotta Have It, an ice cream company, realizes it needs a short term loan of $50,000. The terms are 5% (.05) annual rate, note payable in 6 months.

When calculating the rEAR remember that the exponent is = 12/6 which indicates the number of compounding periods during the year.

3. Calculate (simple interest):

(3a) rPER = $ cost of borrowing / $ amount of useable funds = _________

(3b) rAPR = rPER x 12# of months = ___________________

(3c) rEAR = (1+rPER ) - 1 = _______________

HINT:

rPER = $ amount (interest x #of months12)$ amount