Answer: 27.70%
Explanation:
The following can be deduced from the question:
Discount = 1%
We then calculate the interest rate based on the discount given in the question. This will be:
= 1%/(100% -1%)
= 1%/99%
= 0.01/0.99
= 0.0101
= 1.01%
Number of days given in respect for the interest = 40 - 25 = 15days
The effective annual interest will be calculated as:
= ((1 + int rate)^m) -1
= ((1 + 1.01%)^(365/15)) - 1
= (1.01)^(24.3) - 1
= 0.27702
= 27.70%
