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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 is the monthly payment?
A) $200.00
B) $192.35
C) $184.20
D) $173.12
E) $166.67

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 is the monthly payment?
A) $200.00
B) $192.35
C) $184.20
D) $173.12
E) $166.67

Quizplus · Accepted Answer

In a discount loan, the interest is deducted from the principal before the loan is disbursed. The interest on a $2,000 loan at 10% is $200 (10% of $2,000). Therefore, the customer receives $1,800 ($2,000 - $200). However, the customer must repay the full $2,000. The repayment is in 12 equal installments, so the monthly payment is $2,000 divided by 12, which equals $166.67.

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