Question

The following three one-year “discount” loans are available to you:

Loan A: $163,348 at a 5.0 percent discount rate

Loan B: $153,348 at a 4.0 percent discount rate

Loan C: $173,348 at a 4.5 percent discount rate Collapse question part:

(a) Determine the dollar amount of interest you would pay on each loan and indicate the amount of net proceeds each loan would provide. (Round answers to 0 decimal place, e.g. 5275.)

Interest- Loan A ??????$ $ Loan B?????? $ $ Loan C???? $ $

Net Proceeds- Loan A ?????$ $ Loan B ?????$ $ Loan C ????$ $

Answer 1

Discount Loans are the Loans on which Int to be is deducted from loan amount at the time of loan approval and balance will be transferred. At the time of Loan repayment, one has to repay full Loan. The difference will be considered as int (Compensation for Loan).

Int = Loan * Int Rate

Loan A:

= $ 163348 * 5%

= $ 8167.4

Loan B:

= $ 153348 * 4%

= $ 6133.92

Loan C:

= $ 173348 * 4.5%

= $ 7800.66

Net Proceeds = Loan - Int

Loan A:

= $ 163348 - $ 8167.4

= $ 155180.6

Loan B:

= $ 153348 - $ 6133.92

= $ 147214.08

Loan C:

= $ 173348 - $ 7800.66

= $ 165547.34