Asked by andrew Hickey on Jun 20, 2024
Verified
White River Bank made the following two loans using a discount rate to compute the charge and then loaned the proceeds to their clients. Compute the amount of discount, the proceeds, and the actual interest rate based upon 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 Rate
The rate of interest imposed on loans obtained by commercial banks and other depository institutions from the Federal Reserve's discount window.
Actual Interest Rate
The real rate of interest earned or paid on an investment, loan, or other financial product, taking into account the effects of compounding.
- Calculate reductions in loan amounts and comprehend the fundamentals of the discount approach.
- Comprehend and compute the real interest rates using the proceeds instead of the nominal value of the loan.
Verified Answer
SN
Learning Objectives
- Calculate reductions in loan amounts and comprehend the fundamentals of the discount approach.
- Comprehend and compute the real interest rates using the proceeds instead of the nominal value of the loan.