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    Sharon's new leather jacket: Time value of money and calculation of rate of interest.

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    Sharon buys a new leather jacket on credit. The cost of the jacket is $500 and has to be fully paid within 30 days.

    But if she pays within 7 days she has to pay only $495.

    Calculate the implicit annual rate of interest of the above transactions.

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    https://brainmass.com/business/the-time-value-of-money/sharon-s-new-leather-jacket-time-value-of-money-and-calculation-of-rate-of-interest-1937

    Solution Preview

    According to the concept of time value of money $1 today is more valuable than $1 tomorrow. Therefore we would delay our payment to the last day possible if we ...

    Solution Summary

    The solution shows all the calculations together with a good explanation of the time value of money as it relates to the cost of Sharon's new leather jacket.

    $2.49

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