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Financial Accounting question: effective interest rate

Life.com issued $19 million of commercial paper on April 1 on a nine-month note. Interest was discounted at issuance at a 6% discount rate.


Complete the below table to calculate the effective interest rate on the commercial paper. (Do not round intermediate calculation. Enter your answers in whole dollars. Round "Annual Effective Rate" to 1 decimal place. (i.e., 0.123 should be entered as 12.3).)


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ReportAnswer #1

Calculate the discount on notes payable:

Calculate the actual cash received or amount barrowed:

Now calculate the effective interest rate:

There annualized effective interest rate = 4.71204 ×

= 6.28

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