This question illustrates what is known as discount interest. Imagine you are discussing a loan with...
This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $17,000 for one year. The interest rate is 16.5 percent. You and the lender agree that the interest on the loan will be .165 × $17,000 = $2,805. So, the lender deducts this interest amount from the loan up front and gives you $14,195. In this case, we say that the discount is $2,805.
What is the interest rate on this loan?
Interest rate =
Homework Answers
Interest rate on the loan = Interest amount/ Loan amount available for use
= 2805/14195
=19.76%
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This question illustrates what is known as discount interest.
Imagine you are discussing a loan with...
This question illustrates what is known as discount interest. Imagine you are discussing a loan with...
This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $22,000 for one year. The interest rate is 17.75 percent. You and the lender agree that the interest on the loan will be .1775 × $22,000 = $3,905. So, the lender deducts this interest amount from the loan up front and gives you $18,095. In this case, we say that the discount is $3,905. What is...
This question illustrates what is known as discount interest. Imagine you are discussing a loan with...
This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $34,000 for one year. The interest rate is 20.75 percent. You and the lender agree that the interest on the loan will be .2075 × $34,000 = $7,055. So, the lender deducts this interest amount from the loan up front and gives you $26,945. In this case, we say that the discount is $7,055. What is...
This question illustrates what is known as discount interest. Imagine you are discussing a loan with...
This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $31,000 for one year. The interest rate is 20 percent. You and the lender agree that the interest on the loan will be .20 × $31,000 = $6,200. So, the lender deducts this interest amount from the loan up front and gives you $24,800. In this case, we say that the discount is $6,200. What is...
This question illustrates what is known as discount interest. Imagine you are discussing a E loan...
This question illustrates what is known as discount interest. Imagine you are discussing a E loan with a somewhat unscrupulous lender. You want to borrow $35,000 for one year. The interest rate is 14.0 percent. You and the lender agree that the interest on the loan will be 0.140 x $35.000 = $4.900. So the lender deducts this interest amount from the loan up front and gives you $30,100. In this case, we say that the discount is $4,900. What...
This question illustrates what is known as discount interest. Imagine you are discussing a loan with...
This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $32,000 for one year. The interest rate is 13.7 percent. You and the lender agree that the interest on the loan will be .137 * $32,000 = $4,384. So the lender deducts this interest amount from the loan up front and gives you $27,616. In this case, we say that the discount is $4,384. What is the...
How would you put this in a financial calculator to get the interest rate
How would you put this in a financial calculator to get the interest rate?This question illustrates what somewhat unscrupulous lender. You want to borrow $29,000 for one year. The interest rate is 19.5 percent. You lender agree that the interest on the loan will be .195x $29,000 $5,655. So, the lender deducts this interest amount from the loan up front and gives you $23,345. In this case, we say that the discount is known as discount interest. Imagine you are...
This problem illustrates a deceptive way of quoting interest rates called add-on interest. Imagine that you...
This problem illustrates a deceptive way of quoting interest rates called add-on interest. Imagine that you see an advertisement for Crazy Judy's Stereo City that reads something like this: "$1,000 Instant Credit! 16.5% Simple Interest! Three Years to Pay! Low, Low Monthly Payments!" You're not exactly sure what all this means and somebody has spilled ink over the APR on the loan contract, so you ask the manager for clarification. Judy explains that if you borrow $1,000 for three years...
In a discount interest loan, you pay the interest payment up front. For example, if a...
In a discount interest loan, you pay the interest payment up
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
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b. What is the effective...
You are getting a discount interest loan of $25,000 for one year. The stated rate of...
You are getting a discount interest loan of $25,000 for one year. The stated rate of interest is 6%. Calculate the effective interest rate ______%. A. 6.83 B. 6.38 C. 6.12 D. 6.00 You can borrow $75,000 for six months at a stated annual rate of 8%. Calculate the effective annual interest rate _______%. A. 16.64 B. 8.50 C. 8.16 D. 8.00
This question illustrates what is known as discount interest. Imagine you are discussing a E loan with a somewhat unscrupulous lender. You want to borrow $35,000 for one year. The interest rate is 14.0 percent. You and the lender agree that the interest on the loan will be 0.140 x $35.000 = $4.900. So the lender deducts this interest amount from the loan up front and gives you $30,100. In this case, we say that the discount is $4,900. What...
This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $32,000 for one year. The interest rate is 13.7 percent. You and the lender agree that the interest on the loan will be .137 * $32,000 = $4,384. So the lender deducts this interest amount from the loan up front and gives you $27,616. In this case, we say that the discount is $4,384. What is the...
This problem illustrates a deceptive way of quoting interest rates called add-on interest. Imagine that you see an advertisement for Crazy Judy's Stereo City that reads something like this: "$1,000 Instant Credit! 16.5% Simple Interest! Three Years to Pay! Low, Low Monthly Payments!" You're not exactly sure what all this means and somebody has spilled ink over the APR on the loan contract, so you ask the manager for clarification. Judy explains that if you borrow $1,000 for three years...
In a discount interest loan, you pay the interest payment up
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
answer as a percent rounded to 2 decimal places.)
b. What is the effective...
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