Loan Amount: $15,000
Method of payment: discount basis
Amount of Interest : $650
Term of loan: 1 year
Effective Rate of Interest (to the nearest tenth):
I tried to work this out but I got it completely WRONG !!
Interest = principal * rate * time
650 = 15,000 * r * 1
650 = 15,000r
650/15,000 = r
0.04333 = 4.3% = r
To calculate the effective rate of interest on a discount basis, you need to use the following formula:
Effective Rate of Interest = (Interest / Loan Amount) * (360 / Term of Loan)
Let's plug in the given values into the formula:
Interest = $650
Loan Amount = $15,000
Term of Loan = 1 year
Effective Rate of Interest = ($650 / $15,000) * (360 / 1)
Calculating the numerator first:
($650 / $15,000) * (360 / 1) = 0.0433 * 360
Now, calculating the denominator:
0.0433 * 360 = 15.588
Rounding the result to the nearest tenth:
Effective Rate of Interest ≈ 15.6%
So, the effective rate of interest (to the nearest tenth) on a discount basis for a $15,000 loan with an interest of $650 and a term of 1 year is approximately 15.6%.
To determine the effective rate of interest, you need to use the formula:
Effective Rate of Interest = (Interest / Loan Amount) × (365 / Term of Loan) × 100
Let's plug in the values you provided:
Loan Amount = $15,000
Interest = $650
Term of Loan = 1 year
Now we can calculate the effective rate of interest:
Effective Rate of Interest = (650 / 15,000) × (365 / 1) × 100
First, divide 650 by 15,000:
Effective Rate of Interest = (0.0433) × (365 / 1) × 100
Next, multiply 0.0433 by 365, and then multiply by 100:
Effective Rate of Interest = 15.8145
To the nearest tenth, the effective rate of interest is approximately 15.8%.