Asked by Jamie Williams on May 11, 2024
Verified
On some personal loans, Buckhorn County Bank & Trust uses the discount method of calculating finance charges. For the two loans below, calculate the discount amount that Buckhorn Bank is charging and the proceeds that go to the borrower. Then calculate the actual interest rate which is based on the proceeds rather than the face value. Use a 360-day year and compute actual rates to the nearest 1/100 of a percent.
Discount Method
Method of computing the net price using the trade discount rate to calculate the amount of trade discount, and, subsequently, the net price.
Actual Interest Rate
The real cost of borrowing money, including all fees and interest rates, more comprehensively represented than the nominal interest rate.
- Determine markdowns on loans and fathom the principles behind the discount technique.
- Attain the understanding to identify and compute the true interest rates from the proceeds against the loan's face value.
Verified Answer
SK
Learning Objectives
- Determine markdowns on loans and fathom the principles behind the discount technique.
- Attain the understanding to identify and compute the true interest rates from the proceeds against the loan's face value.