Question
In: Finance
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 $18,000 for one year. The interest rate is 16.75 percent. You and the lender agree that the interest on the loan will be .1675 × $18,000 = $3,015. So, the lender deducts this interest amount from the loan up front and gives you $14,985. In this case, we say that the discount is $3,015. What is the interest rate on this loan? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Interest rate ___%
Solutions
Expert Solution
Using financial calculator
Input:
PV = 14985
Fv = -18000
N = 1
Solve for I/Y as 20.12
Interest rate on the loan = 20.12%
jeff jeffy answered 2 years agoRelated Solutions
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