Consider a discounted loan of $500, where the proceeds equal $458.75. The loan is repaid at the end of 11 months. Find the annual simple discount rate.

Aron Heath

Aron Heath

Answered question

2022-11-07

Consider a discounted loan of $500, where the proceeds equal $458.75. The loan is repaid at the end of 11 months. Find the annual simple discount rate.

Answer & Explanation

Ryan Davies

Ryan Davies

Beginner2022-11-08Added 18 answers

Solution:
Taken loan is $500
Proceeds = $458.75
Discount given in 11 months =$500-$458.75
discount in one month = $ 41.25 11
discount in 12 month = $ 41.25 11 × 12
Annual simple discast Rate
= $ ( 41.25 11 × 500 × 12 × 100 ) % = 9 %
therefore annual simple distant Rate is 9%

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