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August 27, 2014

August 27, 2014

Posted by **Queen** on Saturday, December 8, 2012 at 7:56pm.

- Math -
**Damon**, Saturday, December 8, 2012 at 8:54pmFor the simple loan what is the interest rate paid for 9 months?

Interest paid = .08(9/12)(12,000) = 720

r = what you paid/what you got = 720/12,000 = .06

what is the real interest rate on the discounted loan?

Well, how much is the nominal interest paid?

I = .07 * (9/12)(12,000) = 630 looks cool but

what you got = 12,000 - 630 = 11,370

so

r = 630/11370 = .055

so you are half a percent better off with the discounted loan, although you walk out of the bank with less than the 12,000 you needed.

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