Wilson borrowed $14,357 for 100 days at 15% simple interest. If we looked at this loan as simple discount loan instead, what would the equivalent simple discount rate be?

Question

Wilson borrowed $14,357 for 100 days at 15% simple interest. If we looked at this loan as simple discount loan instead, what would the equivalent simple discount rate be?

Please help me solve and show work.

Thanks.

Answer 1

To find the equivalent simple discount rate, we need to first calculate the interest amount using simple interest formula:

Simple Interest = Principal x Rate x Time

Given:
Principal (P) = $14,357
Rate (R) = 15%
Time (T) = 100 days

Calculating the simple interest:
Simple Interest = 14,357 x 0.15 x (100/365)
≈ $587.82

Now, we can calculate the equivalent simple discount rate using the formula:

Equivalent Simple Discount Rate = (Simple Interest / Principal) x (365 / Time)

Equivalent Simple Discount Rate = (587.82 / 14,357) x (365 / 100)
≈ 0.0411 x 3.65
≈ 0.1501

Therefore, the equivalent simple discount rate is approximately 15.01%, or rounded to two decimal places, 15.01%.