Asked by Karina Rocha on May 17, 2024
Verified
SCB Capital Bank uses the discount method of calculating finance charges on some loans. For the two loans below, calculate the discount amount that goes to Riverside 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 365-day year and compute actual rates to the nearest 1/100 of a percent.
Discount Method
A valuation technique where a future cash flow or series of cash flows is discounted back to the present to determine its worth.
Actual Interest Rate
The real rate of interest earned or paid after adjusting for compounding and fees.
- Calculate discount rates on loans and seize the essential concepts of the discount method.
- Gain the knowledge to interpret and work out the actual interest rates based on proceeds instead of the loan's stated value.
Verified Answer
ZH
Learning Objectives
- Calculate discount rates on loans and seize the essential concepts of the discount method.
- Gain the knowledge to interpret and work out the actual interest rates based on proceeds instead of the loan's stated value.