Discount loan. Up-Front Bank uses discount loans for all its customers who want one-year loans. Currently, the bank is providing one-year discount loans at 8.5%. What is the effective annual rate on these loans? If you were required to repay $225,000 at the end of the loan for one year, how much would the bank have given yor at the start of the loan?
Discount loan. Up-Front Bank uses discount loans for all its customers who want one-year loans. Currently, the bank is providing one-year discount loans at 8.5%. What is the effective annual rate on these loans? If you were required to repay $225,000 at the end of the loan for one year, how much would the bank have given yor at the start of the loan?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Discount loan. Up-Front Bank uses discount loans for all its customers who want one-year loans. Currently, the bank is providing one-year discount loans at 8.5%.
What is the effective annual rate on these loans? If you were required to repay $225,000 at the end of the loan for one year, how much would the bank have given you
at the start of the loan?
Transcribed Image Text:Discount loan. Up-Front Bank uses discount loans for all its customers who want one-year loans. Currently, the bank is providing one-year discount loans at 7.5%.
What is the effective annual rate on these loans? If you were required to repay $225,000 at the end of the loan for one year, how much would the bank have given you
at the start of the loan?
If you were required to repay $225,000 at the end of the loan for one year, how much would the bank have given you at the start of the loan?
$ 208,125 (Round to the nearest dollar.)
What is the effective annual rate on this loan?
8.108 % (Round to three decimal places.)
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