Von Hayek's Kayaks can borrow $10,000 for 60 days at a cost of $200 interest. What is the effective rate of in?

Von Hayek's Kayaks can borrow $10,000 for 60 days at a cost of $200 interest. What is the effective rate of interest?


A. Less than9.9 percent


B. More than 9.9 percent, but less than 10 percent


C. More than 10.5 percent, but less than 11.5 percent


D. More than 11.5 percent|||The answer is D.





If the cost for that 60 day (2 month) loan is $200, then the interest cost for that loan on a 12 month full year basis would be 6 times that much or $1,200. $1,200/$10,000 = 0.12 = 12%.|||Here is how to think through to develop a solution when you have this type of question:





60 days is 1/6th of a year





200 is 2% of 10,000





2% x 6 is your effective rate