Asked by Taira DeSutter on Jun 15, 2024
Verified
Thrifty Home Loan Corp. uses the discount method of calculating finance charges. For the two loans below, calculate the discount amount that Thrifty charges 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
A financial strategy where the interest and financing charges are calculated at the time of the sale and deducted from the principal before the loan is disbursed.
Actual Interest Rate
The real rate of interest earned or paid on an investment, loan, or savings, taking into account compounding and fees.
- Work out the discounts applied to loans and understand the basics of the discount technique.
- Master the ability to determine and calculate the true interest rates derived from proceeds as opposed to the face value of the loan.
Verified Answer
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Learning Objectives
- Work out the discounts applied to loans and understand the basics of the discount technique.
- Master the ability to determine and calculate the true interest rates derived from proceeds as opposed to the face value of the loan.
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