Which of the following is a true statement regarding interest calculation methods?
A. If a borrower receives a loan on a discount basis, the APR will be less than the simple interest.
B. Interest is calculated either on a straight basis or a delayed basis.
C. If a borrower receives a loan on a discount basis, the APR will be more than the simple interest rate.
D. Interest is calculated either on a straight basis or an undiscounted basis.
My answer is C. is this correct?
To determine the correct answer, let's analyze the options and break down the question:
A. If a borrower receives a loan on a discount basis, the APR will be less than the simple interest.
This statement suggests that when a borrower receives a loan on a discount basis, the Annual Percentage Rate (APR) will be lower than the simple interest rate. However, it's important to understand that APR includes not only the interest rate but also other costs associated with borrowing, such as fees.
B. Interest is calculated either on a straight basis or a delayed basis.
This statement presents two possible methods of interest calculation: straight basis or delayed basis. However, without further context, it is unclear what these methods entail.
C. If a borrower receives a loan on a discount basis, the APR will be more than the simple interest rate.
This statement claims that if a borrower receives a loan on a discount basis, the APR will be higher than the simple interest rate.
D. Interest is calculated either on a straight basis or an undiscounted basis.
This statement mentions two possible methods of interest calculation: straight basis or undiscounted basis. However, similar to option B, the specific details and implications of these methods are not explained.
Based on the explanations above, we can conclude that the correct answer is C: If a borrower receives a loan on a discount basis, the APR will be more than the simple interest rate.