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A bank customer is granted credit for a $2,000 loan at 10% to be repaid in 12 equal installments.
-If the loan is a discount loan, what are the net proceeds of the loan?
A) $2,200
B) $2,100
C) $2,000
D) $1,800
E) Cannot be determined

Question

Use the following information for questions 
A bank customer is granted credit for a $2,000 loan at 10% to be repaid in 12 equal installments.
-If the loan is a discount loan, what are the net proceeds of the loan?
A) $2,200
B) $2,100
C) $2,000
D) $1,800
E) Cannot be determined

Quizplus · Accepted Answer

Since the loan is a discount loan, the interest is deducted from the total amount of the loan upfront, and the customer receives the net proceeds.

The interest on the loan is 10% of $2,000, which is $200.

Therefore, the net proceeds of the loan are $2,000 - $200 = $1,800.

Therefore, the best choice is D.

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