A bank offers you a 9 month discounted loan,at a simple discount rate of d = 9.5%.In order to receive $5000 today,what size loan should you ask for?

Question

Quizplus · Accepted Answer

The size of the loan needed can be calculated using the formula for the proceeds from a discounted loan: Proceeds = Loan Amount - (Loan Amount * Discount Rate). To find the Loan Amount, rearrange the formula to Loan Amount = Proceeds / (1 - Discount Rate). Plugging in the given values: Loan Amount = $5000 / (1 - 0.095) = $5000 / 0.905 = $5524.86. The closest option to this calculated value is $5383.58.

A Bank Offers You a 9 Month Discounted Loan,at a Simple