Jack signed a 9000.00 note at fleet bank. Fleet chared a 9 1/4% discount rate. If the loan is for 200 days, find A) the proceeds and B) the effective rate charged b the bank. (to the nearest tenth percent
To find the proceeds of the loan, we first need to calculate the discount amount, which is the interest charged by the bank.
Step 1: Calculate the discount amount.
Discount amount = Loan amount × Discount rate
Discount amount = $9000 × 9.25% [9 1/4% = 9.25%]
Discount amount = $9000 × 0.0925
Discount amount = $832.50
Step 2: Calculate the proceeds.
Proceeds = Loan amount − Discount amount
Proceeds = $9000 − $832.50
Proceeds = $8167.50
Therefore, the proceeds (amount Jack actually receives) is $8167.50.
To find the effective rate charged by the bank, we need to calculate the annualized interest rate first.
Step 1: Calculate the daily rate.
Daily rate = Discount rate ÷ 365
Daily rate = 9.25% ÷ 365
Daily rate = 0.0925 ÷ 365
Daily rate = 0.0002534
Step 2: Calculate the annualized rate.
Annualized rate = Daily rate × 365
Annualized rate = 0.0002534 × 365
Annualized rate = 0.0925
Therefore, the effective rate charged by the bank is 9.25% (to the nearest tenth percent).