In a discount inter- est loan, you pay the interest payment up front. For example, if...
In a discount inter- est loan, you pay the interest payment up front. For example, if a 1-year loan is stated as $10,000 and the interest rate is 10%, the borrower “pays” .10 × $10,000 = $1,000 immediately, thereby receiving net funds of $9,000 and repaying $10,000 in a year.
I have this question and i know the answer is 11.11 but im not sure how you came to this answer.
i got 10,000=9,000 x (1+r) but im not getting the right answer when I do this.
help please
Homework Answers
You got the equation right, you may have made error in steps while solving it:
Answer:
Let us assume the effective interest rate is = r
Hence from information given, we have:
10000 = 9000 * (1+r)
=> 9000 * (1+r) = 10000
=> 9000 + 9000* r = 10000
=> 9000* r = 10000 - 9000
=> 9000* r = 1000
=> r = 1000 / 9000
=> r = 0.1111 or 11.11%
So the answer is 11.11%
Add Answer to:
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front. For example, if a 1-year loan is stated as $50,000 and the
interest rate is 7.50%, the borrower “pays” 0.0750 × $50,000 =
$3,750 immediately, thereby receiving net funds of $46,250 and
repaying $50,000 in a year.
a. What is the effective interest rate on this
loan? (Do not round intermediate calculations. Enter your
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b. What is the effective...
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