Asked by Dusty Taylor on May 25, 2024
Verified
Sincere Personal Loan Corp. uses the discount method of calculating finance charges on many different loans. For the two loans below, calculate the discount amount that goes to Sincere 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
The discount method is a way of understanding the value of money received in the future as being less valuable than money held today, often used in calculating the present value of future cash flows.
Actual Interest Rate
The actual interest rate received or incurred on a loan or investment, considering the impact of compounding.
- Determine discounts on borrowings and grasp the core concepts of the discount method.
- Learn to ascertain and figure out the genuine interest rates based on proceeds in opposition to the loan's nominal value.
Verified Answer
NA
Learning Objectives
- Determine discounts on borrowings and grasp the core concepts of the discount method.
- Learn to ascertain and figure out the genuine interest rates based on proceeds in opposition to the loan's nominal value.