Answer:
The annualized cost of borrowing is 5.42%
Explanation:
The cost of borrowing is the finance charge which is the dollar amount of the loan that cost the person. Lenders usually charge what is referred to as the simple interest.
The formula to compute the same is as:
Principal x rate x time = Interest
where
Principal amount is $3,000,000
Rate is not known
Time is 45 days, So time is number of days borrowed divided by number of days in a year
Time = 45 / 365 days
Time = 0.123
Interest = Par value - Selling Value
Interest = $3,000,000 - $2,980,000
Interest = $20,000
Putting the value above:
Rate = Interest / Principal x Time
Rate = $20,000 / $3,000,000 x 0.123
Rate = $20,000 / $369,000
Rate = 5.42%
