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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 quoted has an add-on rate, 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 quoted has an add-on rate, 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

The net proceeds of the loan are the amount the customer actually receives, which in this case is the original loan amount of $2,000. An add-on rate affects the total amount of interest paid over the life of the loan, not the initial amount received.

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