Asked by vanilson baptista on May 25, 2024
Verified
Moneywise Loans and Credit Corp. makes many consumer loans by discounting the face value of the loan. The borrower gets the proceeds. For the two loans below, determine the amount of the discount, the proceeds, and 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.
Consumer Loans
Loans given to individuals by financial institutions for personal, family, or household purposes such as buying a car or home improvement.
Actual Interest Rate
The true rate of interest earned or paid on an investment, loan, or other financial product over a specific time period.
- Comprehend the principle of reducing the nominal value of a loan and its impact on the funds received by the borrower.
- Ascertain the reduction percentages and proceeds from diverse borrowing scenarios.
- Identify the true interest rate based on proceeds in lieu of face value, taking into account both 365-day and 360-day year calculations.
Verified Answer
HD
Learning Objectives
- Comprehend the principle of reducing the nominal value of a loan and its impact on the funds received by the borrower.
- Ascertain the reduction percentages and proceeds from diverse borrowing scenarios.
- Identify the true interest rate based on proceeds in lieu of face value, taking into account both 365-day and 360-day year calculations.
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