Bolt Corp. acquires equipment valued at $81,630 by signing a 3-year noninterest-bearing note payable for $100,000. Calculate the implicit interest rate on the note.

7%

Explanation:

Calculation for the implicit interest rate on the note

First step is to calculate the PV factor

PV factor=$81,630/100,000

PV factor = 0.81630

Last Step is to find the implicit interest rate by using the PV table for 3 years to find the factor that matches the PV factor of 0.81630

Hence the factor that matches the PV factor of 0.81630 can be found or see in the 7% column which means that the implicit interest rate will be 7%

Therefore the implicit interest rate on the note will be 7%

Generally, financial institutions would calculate interest using two models: simple interest and compound interest.

Simple interest refers to calculating interest only on the loan amount you are given or the deposit amount you make, while compound interest refers to calculating interest based on the loan amount you are given or the deposit amount you make as well as the interest it accumulates in every period.