A bill for $100 is purchased for $96 three months before it is due. Find:a) The nominal rate of discount convertible quarterly earned by the purchaser.b) The annual effective rate of interest earned by the purchaser. THE ANSWERS ARE: a) 16% b) 17.74% I just don't know how to get there. Please explain every detail. If youshow different answers, I will thumbs down.

Answered: Image /qna-images/answer/52d0e1df-f0d4-4228-8ec1-90392e377ea1.jpg

Answered: A bill for $100 is purchased for $96…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A bill for $100 is purchased for $96 three months before it is due. Find: a) The nominal rate of discount convertible quarterly earned by the purchaser. b) The annual effective rate of interest earned by the purchaser.