On October 31, 2011, Simeon Builders borrowed $16 million cash and issued a 7-month, noninterest-bearing note. The loan was made by Star Finance Co. whose stated discount rate is 8%. Sky's effective interest rate on this loan is:
A. More than the stated discount rate of 8%.
B. Less than the stated discount rate of 8%.
C. Equal to the stated discount rate of 8%.
D. Unrelated to the stated discount rate of 8%.
Answer: A
If the answers is incorrect or not given, you can answer the above question in the comment box. If the answers is incorrect or not given, you can answer the above question in the comment box.