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11 May, 14:57

The Jasmine Tea Company purchased merchandise from a supplier for $46,700. Payment was a noninterest-bearing note requiring Jasmine to make five annual payments of $12,000 beginning one year from the date of purchase. What is the interest rate implicit in this agreement?

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  1. 11 May, 15:31
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    Implicit interest = 28.48%

    Explanation:

    Giving the following information:

    The Jasmine Tea Company purchase merchandise from a supplier for $46,700.

    Payment is five annual payments of $12,000 beginning one year from the date of purchase.

    The total payment is = 12000*5 = $60000

    Implicit interest = (60000/46700) - 1 = 28.48%
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