Asked by Gurkamal Cheema on May 06, 2024
Verified
(Last Word) Suppose you borrow $500 for a year and the lender discounts $75 of interest at the time the loan is made (giving the borrower only $425) .The interest rate on this loan is about:
A) 12.5 percent.
B) 14.5 percent.
C) 17.6 percent.
D) 10 percent.
Interest Rate
The cost of borrowing money or the reward for saving, usually expressed as a percentage of the principal amount per period.
- Acquire knowledge on the effect of interest rates on both the economy at large and on individual monetary decisions.
Verified Answer
KS
Kadeidra StatonMay 10, 2024
Final Answer :
C
Explanation :
The interest rate is calculated based on the actual amount received by the borrower, which is $425. The interest charged is $75. To find the interest rate: Interest Rate = (Interest / Principal) * 100 = ($75 / $425) * 100 ≈ 17.6%.
Learning Objectives
- Acquire knowledge on the effect of interest rates on both the economy at large and on individual monetary decisions.