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.

Calculate (discount interest):

(4a) Calculate the rPER 6 month DISCOUNT interest:

HINT:

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

(4b) Calculate the rEAR 6 month DISCOUNT interest:

HINT:

rEAR = (1+rPER ) - 1