A man takes out a discounted loan,with face amount $8235,at a simple discount rate of d = 7.5%.If the amount he pays back in 11 months is $8235,how much interest does the man pay on the loan and when does he pay the interest?
A)$529.74,paid today at issue of the loan
B)$529.74,paid at the end of 11 months
C)$566.16,paid today at issue of the loan
D)$566.16,paid at the end of 11 months

Question

Quizplus · Accepted Answer

We can use the formula for simple discount interest to find the amount of interest paid on the loan:

Interest = Face Value x Discount Rate x Time
Interest = 8235 x 0.075 x (11/12)
Interest = $566.16

Therefore, the man pays $566.16 in interest on the loan. According to the question, he pays back the face amount of $8235 at the end of 11 months, so the interest must be paid today at the issue of the loan in order to receive the discounted amount.

Thus, the correct answer is C: $566.16, paid today at issue of the loan.

A Man Takes Out a Discounted Loan,with Face Amount $8235,at