Discount interest-what is the effective interest rate

Assignment Help Financial Management

Reference no: EM13934630

This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $31,000 for one year. The interest rate is 13.6 percent. You and the lender agree that the interest on the loan will be 0.136 × $31,000 = $4,216. So the lender deducts this interest amount from the loan up front and gives you $26,784. In this case, we say that the discount is $4,216.

What is the effective interest rate?

Reference no: EM13934630

Questions Cloud

Infertility can be a very hard obstacle for married couples : Infertility can be a very hard obstacle for married couples. Based on your readings this week, what are male and female factors that can lead to infertility?What is Assisted Reproductive Technology (ART) and what are some benefits of using ART to con..

About the what is the firms net float : Tanner Tavern writes four checks a day for an average amount of $5,400 each. These checks generally clear the bank four days after they are written. In addition, the firm generally receives and deposits checks amounting to $18,700 each day. All depos..

Design a dietary programme : Choose 3 conditions from the body systems covered throughout this module and design a dietary programme for each of these conditions.

Suppose a job required parts costing : Suppose a job required parts costing $200 and technician time costing $100.What would be the total cost of the job?

Discount interest-what is the effective interest rate : This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $31,000 for one year. The interest rate is 13.6 percent. You and the lender agree that the interes..

Calculate the amounts of formic acid and formate : A solution which is 3.19X10 to the -3 M in an acid (HA) and 6.78x10 to the -3 M in its conjugate base (A-) is found to have a pH of 8.65. What is the Ka of the acid?

Digital measurements of millions of trees indicate : Digital measurements of millions of trees indicate that previous studies likely overestimate the amount of carbon stored by temperate U.S. forests, according to a new NASA study.

Outline a nutritional treatment strategy : Give a brief description, discuss the cause and pathogenesis (with emphasis on the nutritional understanding of these), outline a nutritional treatment strategy, and design a dietary programme specifically beneficial to the condition.

What rate would you actually be paying here : You are looking at a one-year loan of $15,500. The interest rate is quoted as 8.9 percent plus four points. A point on a loan is simply 1 percent (one percentage point) of the loan amount. Quotes similar to this one are common with home mortgages. Wh..

User Account

All Pages