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info@snapandsolve.comInterest Earned (Bank Discount): The bank discount is calculated as follows:
Discount = Face Value × Discount Rate × (Days to Maturity / 360)
Discount = $2,500,000 × 0.065 × (273 / 360) = $123,958.33
Purchase Price: The purchase price is the face value minus the discount:
Purchase Price = Face Value - Discount = $2,500,000 - $123,958.33 = $2,376,041.67
Effective Rate of Interest: The effective rate of interest is calculated as follows:
Effective Rate = (Discount / Purchase Price) × (360 / Days to Maturity)
Effective Rate = ($123,958.33 / $2,376,041.67) × (360 / 273) = 0.068 or 6.8%
Answer: 6.8%
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